10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-5978

SIFCO Industries, Inc.

(Exact name of registrant as specified in its charter)

Ohio	34-0553950
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
970 East 64th Street, Cleveland Ohio	44103
(Address of principal executive offices)	(Zip Code)

(216) 881-8600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	ý
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

The number of the Registrant’s Common Shares outstanding at March 31, 2017 was 5,598,716.

Part I. Financial Information

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,
	2017			2016			2017			2016
Net sales	$	31,302		$	29,075		$	62,776		$	56,237
Cost of goods sold	27,643			25,513			54,948			50,566
Gross profit	3,659			3,562			7,828			5,671
Selling, general and administrative expenses	4,396			3,130			9,699			8,750
Amortization of intangible assets	573			613			1,165			1,328
(Gain) loss on disposal of operating assets	—			30			(6		)	32
Operating loss	(1,310		)	(211		)	(3,030		)	(4,439		)
Interest income	(16		)	(22		)	(30		)	(32		)
Interest expense	541			436			1,219			845
Foreign currency exchange loss, net	12			20			17			34
Other income, net	(107		)	(107		)	(214		)	(214		)
Loss from operations before income tax expense (benefit)	(1,740		)	(538		)	(4,022		)	(5,072		)
Income tax expense (benefit)	(83		)	(239		)	244			(2,175		)
Net loss	$	(1,657	)	$	(299	)	$	(4,266	)	$	(2,897	)
Net loss per share
Basic	$	(0.30	)	$	(0.05	)	$	(0.78	)	$	(0.53	)
Diluted	$	(0.30	)	$	(0.05	)	$	(0.78	)	$	(0.53	)
Weighted-average number of common shares (basic)	5,479			5,464			5,473			5,458
Weighted-average number of common shares (diluted)	5,479			5,464			5,473			5,458

See notes to unaudited consolidated condensed financial statements.

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SIFCO Industries, Inc. and Subsidiaries

Consolidated Condensed Statements of Comprehensive Loss

(Unaudited)

(Amounts in thousands)

	Three Months Ended   March 31,						Six Months Ended   March 31,
	2017			2016			2017			2016
Net loss	$	(1,657	)	$	(299	)	$	(4,266	)	$	(2,897	)
Other comprehensive income (loss):
Foreign currency translation adjustment	245			762			(803		)	315
Retirement plan liability adjustment, net of tax	214			210			448			403
Interest rate swap agreement adjustment, net of tax	13			—			29			—
Comprehensive income (loss)	$	(1,185	)	$	673		$	(4,592	)	$	(2,179	)

See notes to unaudited consolidated condensed financial statements.

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SIFCO Industries, Inc. and Subsidiaries

Consolidated Condensed Balance Sheets

(Amounts in thousands, except per share data)

	March 31,   2017			September 30,   2016
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,356		$	471
Receivables, net of allowance for doubtful accounts of $423 and $706, respectively	26,190			25,158
Inventories, net	25,449			28,496
Refundable income taxes	1,825			1,773
Prepaid expenses and other current assets	2,207			2,177
Total current assets	57,027			58,075
Property, plant and equipment, net	45,878			48,958
Intangible assets, net	9,801			11,138
Goodwill	11,349			11,748
Other assets	281			538
Total assets	$	124,336		$	130,457
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	7,393		$	18,258
Revolving credit agreement	21,573			12,751
Accounts payable	15,418			14,520
Accrued liabilities	5,877			5,234
Total current liabilities	50,261			50,763
Long-term debt, net of current maturities	6,660			7,623
Deferred income taxes	2,836			2,929
Pension liability	8,010			8,341
Other long-term liabilities	465			431
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 – 5,599 at March 31, 2017 and 5,525 at September 30, 2016	5,599			5,525
Additional paid-in capital	9,470			9,219
Retained earnings	54,211			58,476
Accumulated other comprehensive loss	(13,176		)	(12,850		)
Total shareholders’ equity	56,104			60,370
Total liabilities and shareholders’ equity	$	124,336		$	130,457

See notes to unaudited consolidated condensed financial statements.

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SIFCO Industries, Inc. and Subsidiaries

Consolidated Condensed Statements of Cash Flows

(Unaudited, Amounts in thousands)	Six Months Ended   March 31,
	2017			2016
Cash flows from operating activities:
Net loss	$	(4,266	)	$	(2,897	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	4,939			5,366
Amortization and write-off of debt issuance cost	328			72
(Gain) loss on disposal of operating assets	(6		)	32
LIFO expense (benefit)	225			(8		)
Share transactions under company stock plan	325			(642		)
Purchase price inventory adjustment	—			266
Other long-term liabilities	202			160
Deferred income taxes	32			(642		)
Changes in operating assets and liabilities:
Receivables	(1,245		)	6,439
Inventories	2,581			(375		)
Refundable taxes	(52		)	(1,374		)
Prepaid expenses and other current assets	322			(317		)
Other assets	243			315
Accounts payable	881			4,809
Other accrued liabilities	597			722
Accrued income and other taxes	167			(163		)
Net cash provided by operating activities of operations	5,273			11,763
Cash flows from investing activities:
Proceeds from disposal of operating assets	48			—
Capital expenditures	(964		)	(1,176		)
Net cash used for investing activities of operations	(916		)	(1,176		)
Cash flows from financing activities:
Payments on long term debt	(12,907		)	(2,561		)
Proceeds from revolving credit agreement	45,069			19,369
Repayments of revolving credit agreement	(36,247		)	(27,536		)
Payment of debt issue costs	(498		)	—
Short-term debt borrowings	2,330			1,450
Short-term debt repayments	(1,218		)	(1,047		)
Net cash used for financing activities of operations	(3,471		)	(10,325		)
Increase in cash and cash equivalents	886			262
Cash and cash equivalents at the beginning of the period	471			667
Effect of exchange rate changes on cash and cash equivalents	(1		)	23
Cash and cash equivalents at the end of the period	$	1,356		$	952
Supplemental disclosure of cash flow information of operations:
Cash paid for interest	$	(790	)	$	(736	)
Cash paid for income taxes, net	(55		)	(185		)

See notes to unaudited consolidated condensed financial statements.

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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.

The U.S. dollar is the functional currency for all of the Company’s U.S. operations and its Irish subsidiary. For these operations, all gains and losses from completed currency transactions are included in income currently. 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 2016 Annual Report on Form 10-K. The year-end consolidated condensed balance sheet data was derived from audited financial statements and disclosures required by accounting principles generally accepted accounting in the United States ("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 fiscal 2016 Annual Report on Form 10-K.

C. Net Loss per Share

The Company’s net loss per basic share has been computed based on the weighted-average number of common shares outstanding. Net loss per diluted share reflects the effect of the Company’s outstanding restricted shares and performance shares under the treasury stock method. The dilutive effect of the Company’s restricted shares and performance shares were as follows:

	Three Months Ended   March 31,						Six Months Ended   March 31,
	2017			2016			2017			2016
Net loss	$	(1,657	)	$	(299	)	$	(4,266	)	$	(2,897	)
Weighted-average common shares outstanding (basic)	5,479			5,464			5,473			5,458
Effect of dilutive securities:
Restricted shares (a)	—			—			—			—
Weighted-average common shares outstanding (diluted)	5,479			5,464			5,473			5,458
Net loss per share – basic:	$	(0.30	)	$	(0.05	)	(0.78		)	(0.53		)
Net loss per share – diluted:	$	(0.30	)	(0.05		)	$	(0.78	)	$	(0.53	)
Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share	120			17			90			15

(a) Due to a loss for the period, zero restricted shares are included because the effect would be anti-dilutive.

D. Derivative Financial Instruments

The Company entered an interest rate swap agreement on March 29, 2016 to reduce risk related to variable-rate debt, which was subject to changes in market rates of interest. The interest rate swap is designated as a cash flow hedge. The agreement was canceled as part of the debt modification on November 9, 2016, as further discussed in Note 4 - Debt. The Company accounted for the interest rate swap termination by recording the loss in accumulated other comprehensive loss as of December 31, 2016. The amount incurred in interest expense was nominal. As part of the new Credit Facility (described further in Note 4 - Debt, below) on November 9, 2016, the Company entered into a new interest rate swap on November 30, 2016 to reduce risk related to the variable debt over the life of the new term loan. At March 31, 2017, the Company held one interest rate swap agreement with a notional amount of $4,546. Cash flows related to the interest rate swap agreement are included in interest expense. The Company’s

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interest rate swap agreement and its variable-rate term debt were based upon LIBOR. At March 31, 2017 and September 30, 2016, the Company’s interest rate swap agreement qualified as a fully effective cash flow hedge against the Company’s variable-rate term note. The mark-to-market valuation was a $2 and $30 liability at March 31, 2017 and September 30, 2016, respectively.

E. Impact of Recently Issued Accounting Standards

In May 2014, and as subsequently updated (Accounting Standard Update ("ASU") 2016-20 being most recent), the Financial Accounting Standards Board ("FASB") issued new accounting guidance that creates a single revenue recognition model, while clarifying the principles for recognizing revenue. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods. The Company will adopt the new guidance on October 1, 2018. The Company has started a bottoms up approach to analyze the standard's impact on its revenues by looking at historical policies and practices and identifying the differences from applying the new standard to its revenue streams. The Company has not determined the effect of the standard to its consolidated condensed financial statements.

In March 2016, the FASB issued ASU 2016-09, which makes a number of changes meant to simplify and improve accounting for shared-based payments. The ASU will be effective for the Company for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has considered the potential implications of adoption of the ASU and due to the valuation allowance recorded at September 30, 2016 in the U.S., the Company does not expect a material impact from a tax perspective. The Company is still evaluating other non-tax components it may have on its consolidated condensed financial statements.

In October 2016, the FASB issued ASU 2016-16, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory. This ASU will be effective for the Company for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact it may have on its consolidated condensed financial statements, together with evaluating the adoption date.

In November 2016, the FASB issued ASU 2016-18 requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash would be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods. Early adoption is permitted. The Company is currently evaluating its plans regarding the adoption, but does not feel that this ASU is expected to have a material impact to the consolidated condensed statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations, which clarified existing guidance on the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Early adoption is permitted and the guidance is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2017 with early adoption permitted as of the beginning of the annual reporting period in which the ASU was issued. The Company is currently evaluating the potential impact on its consolidated condensed financial statements.

In March 2017, the FASB issued ASU 2017-07, which relates to pension related costs that require an entity to report the following service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs. The other components of the net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside of any subtotal of operating income. Additionally, only the service cost component will be eligible for capitalization in assets. The ASU is effective for October 1, 2018, early adoption is permitted and the ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost in the income statement and prospectively for the capitalization of the service cost component. The amendment allows for a practical expedient that permits an employer to use the amounts disclosed in its pension and other post-retirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. The Company will need to disclose that the practical expedient was used. The Company is currently evaluating the impact it may have on its consolidated condensed financial statements, together with evaluating the adoption date.

F. Recently Adopted Accounting Standards

In January 2017, the FASB issued ASU 2017-04, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The Company performs Step 1 of the annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. If the carrying amount exceeds the fair value, an entity should recognize

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an impairment charge for the amount by which the carrying amount exceeds the fair value, not to exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This ASU must be applied prospectively and is effective for any annual and interim goodwill impairment test in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company has elected to early adopt.

2. Inventories

Inventories consist of:

	March 31,   2017		September 30,   2016
Raw materials and supplies	$	5,721	$	7,724
Work-in-process	10,122		10,459
Finished goods	9,606		10,313
Total inventories	$	25,449	$	28,496

Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (“LIFO”) method for 35% and 44% of the Company’s inventories at March 31, 2017 and September 30, 2016, respectively. The first-in, first-out (“FIFO”) method is used for the remainder of the inventories. If the FIFO method had been used for the inventories for which cost is determined using the LIFO method, inventories would have been $8,252 and $8,026 higher than reported at March 31, 2017 and September 30, 2016, respectively.

3. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follows:

	March 31,   2017			September 30,   2016
Foreign currency translation adjustment	$	(6,426	)	$	(5,623	)
Retirement plan liability adjustment, net of tax	(6,748		)	(7,197		)
Interest rate swap agreement adjustment, net of tax	(2		)	(30		)
Total accumulated other comprehensive loss	$	(13,176	)	$	(12,850	)

4. Debt

Debt consists of:

	March 31,   2017			September 30,   2016
Revolving credit agreement	$	21,573		$	12,751
Foreign subsidiary borrowings	9,168			9,540
Capital lease obligations	394			153
Term loan	4,546			16,429
Less: unamortized debt issuance cost	(55		)	(241		)
Term loan less unamortized debt issuance cost	4,491			16,188
Total Debt	35,626			38,632
Less – current maturities	(28,966		)	(31,009		)
Total long-term debt	$	6,660		$	7,623

On November 9, 2016, the Company entered into an Amended and Restated Credit and Security Agreement ("Credit Facility") with its Lender. The Credit Facility matures on June 25, 2020 and consists of secured loans in an aggregate principal amount of up to $39,871. The Credit Facility is comprised of (i) a senior secured revolving credit facility of a maximum borrowing amount of $35,000, including swing line loans and letters of credit provided by the Lender and (ii) senior secured term loan facility in the amount of $4,871 (the "Term Facility"). The new Term Facility is repayable in monthly installments of $81 beginning December 1, 2016. The terms of the Credit Facility contain both a lockbox arrangement and subjective acceleration clause. As a result, the amounts outstanding on the revolving credit facility are classified as a short-term liability. The amounts borrowed under the Amended and Restated Agreement were used to repay the amounts outstanding under the Company's previous Credit Agreement, for working capital, for general corporate purposes and to pay fees and expenses associated with this transaction. In connection

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with entering into the Credit Facility, the Company terminated its interest rate swap agreement with the Lender, as referenced in Note 1 - D. Derivative Financial Instruments. The Company entered into its First Amendment Agreement ("First Amendment") to the Credit Facility on February 16, 2017. The First Amendment assigned its Lender as Administrative Agent and assigned a portion of its Credit Facility to participating Lender.

Borrowings will bear interest at the LIBOR rate, prime rate, or the eurocurrency reference rate depending on the type of loan requested by the Company, in each case, plus the applicable margin as set forth in the Amended and Restated Agreement. The revolver has a rate based on LIBOR plus a 3.75% spread and a prime rate, which resulted in a weighted average rate of 4.7% at March 31, 2017 and the term loan has a rate of 5.1% at March 31, 2017, which was based on LIBOR plus a 4.25% spread. This rate becomes an effective fixed rate of 5.8% after giving effect to the interest rate swap agreement. There is also a commitment fee ranging from 0.15% to 0.375% to be incurred on the unused balance.

Under the Company's Credit Facility, the Company is subject to certain customary loan covenants. These include, without limitation, covenants that require maintenance of certain specified financial ratios, including that the Company meeting a minimum EBITDA and maintain a minimum fixed charge coverage ratio (to start on September 30, 2017). The Company was in compliance with its loan covenants as of March 31, 2017.

On June 26, 2015, the Company entered a Credit and Security Agreement (the "2015 Credit Agreement") with its Lender. The credit facility was comprised of (i) a five-year revolving credit facility with a maximum borrowing amount of up to $25,000, which reduced to $20,000 on January 1, 2016, and (ii) a five-year term loan of $20,000.  Amounts borrowed under the credit facility were secured by substantially all the assets of the Company and its U.S. subsidiaries and a pledge of 65% of the stock of its non-U.S. subsidiaries. The term loan was repayable in quarterly installments of $714 starting September 30, 2015. The amounts borrowed under the 2015 Credit Agreement were used to repay the Company's previous revolver and term note, to fund the acquisition of the Maniago, Italy location and for working capital and general corporate purposes. The 2015 Credit Agreement also had an accordion feature, which allowed the Company to increase the availability by up to $15,000 upon consent of the existing lenders or upon additional lenders being joined to the facility. Borrowings bore interest at the LIBOR rate, prime rate, or the eurocurrency reference rate depending on the type of loan requested by the Company, in each case, plus the applicable margin as set forth in the Credit Agreement.

Foreign subsidiary borrowings

As of March 31, 2017 and September 30, 2016, the total foreign debt borrowings (excluding capital leases) were $9,168 and $9,540, respectively, of which $6,322 and $5,833, respectively is the current portion. Current debt as of March 31, 2017 and September 30, 2016, consist of $4,043 and $3,262 of short-term borrowings, $1,575 and $2,014 is the current portion of long-term debt, and $704 and $557 of factoring. Interest rates on the term note are based on Euribor rates which range from 1.0% to 4.0%. The factoring programs are uncommitted, whereby the Company offers receivables for sale to an unaffiliated financial institution, which are then subject to acceptance by the unaffiliated financial institution. Following the sale and transfer of the receivables to the unaffiliated financial institution, the receivables are not isolated from the Company, and effective control of the receivables is not passed to the unaffiliated financial institution, which does not have the right to pledge or sell the receivables. 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 sheet. There was $704 and $557 of short-term borrowings relating to this agreement at March 31, 2017 and September 30, 2016, respectively, classified within short-term debt. The carrying value of the receivables pledged as collateral were $1,131 and $1,156 at March 31, 2017 and September 30, 2016.

Future payment schedule

Payments on long-term debt under the Credit Facility and foreign subsidiary borrowings (excluding capital lease obligations, see below) for the remainder of this fiscal year and each of the four succeeding fiscal years are as follows:

	Minimum long-term debt payments
2017 (April 1 to September 30, 2017)	$	1,407
2018	2,188
2019	2,079
2020	3,054
2021	240
Total Minimum long-term debt payments	$	8,968

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Debt issuance costs

The Company incurred debt issuance costs in connection with its 2015 Credit Agreement in the amount of $724. However, with the Credit Facility, the Company incurred an additional $498 of costs in November 2016 and wrote off $241 of debt issuance costs as of December 31, 2016 due to debt modification accounting for deferred financing costs as it relates to the term note, which is included in interest expense in the accompanying consolidated condensed financial statements. Total debt issuance cost in the amount of $786 is split between the Term facility and the revolving credit facility. The portion noted above within debt table relates to the Term facility in the amount of $61, net of amortization of $6 at March 31, 2017. The remaining $725 of debt issuance cost relates to the revolving credit facility. This portion is shown in the consolidated condensed balance sheet as a deferred charge in other current assets, which was reclassed from other long-term assets due to the classification of the revolving credit facility noted above, net of amortization of $181 at March 31, 2017.

Capital leases

The Company entered into new capital leases for equipment in the first quarter of fiscal 2017 . The minimum rental commitments under non-cancelable leases are for the remainder of this fiscal year and each of the succeeding fiscal years are as follows:

	Capital Leases
2017 (April 1 to September 30, 2017)	$	58
2018	118
2019	110
2020	66
2021	66
Thereafter	15
Total minimum lease payments	$	433
Less: Amount representing interest	$	(39	)
Present value of minimum lease payments	$	394

Amortization of the cost of equipment under capital leases is included in depreciation expense. Assets recorded under capital leases consist of the following:

	March 31,   2017			September 30,   2016
Machinery and equipment	$	525		$	250
Accumulated depreciation	(98		)	(60		)

5.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 continuing 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 2017 was (6)%, compared with 43% for the same period of fiscal 2016. This decrease is primarily attributable to year-to-date U.S. loss with no tax benefit due to a valuation allowance in fiscal 2017. Additionally, in fiscal 2016, the effective tax rate was higher in comparison to fiscal 2017 driven by discrete tax benefits of $461 primarily related to tax legislation enacted during the first quarter of fiscal 2016, applied against a year-to-date loss. 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 that 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. The Company believes it has appropriate support for its federal income tax returns.

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6. 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,
	2017			2016			2017			2016
Service cost	$	78		$	69		$	157		$	139
Interest cost	220			256			440			512
Expected return on plan assets	(404		)	(407		)	(809		)	(815		)
Amortization of net loss	214			210			429			420
Net periodic cost	$	108		$	128		$	217		$	256

During the six months ended March 31, 2017 and 2016, the Company made no contributions to its defined benefit pension plans. The Company has carryover balances from previous periods that may be available for use as a credit to reduce the amount of contributions that the Company is required to make to certain defined benefit plans in fiscal 2017. 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 in making additional cash contributions to fund its defined benefit pension plans during the balance of fiscal 2017.

7. Stock-Based Compensation

The Company, with the approval of its shareholders on January 25, 2017, amended and restated its 2007 Long-Term Incentive Plan ("2007 Plan") to the 2016 Long-Term Incentive Plan ("2016 Plan"). The amendment increased the aggregate number of shares that may be awarded under the 2016 Plan to 646 less any shares previously awarded and subject to an adjustment for the forfeiture of any unvested shares. In addition, shares that may be awarded are subject to individual recipient award limitations. The shares awarded under the 2016 Plan may be made in multiple forms, including stock options, stock appreciation rights, restricted or unrestricted stock, and performance related shares. Any such award is exercisable no later than ten years from the date of the grant.

The performance shares that have been awarded under both plans generally provide for the vesting of the Company’s common shares upon the Company achieving certain defined financial performance objectives during a period up to three years following the making of such award. The ultimate number of common shares of the Company that may be earned pursuant to an award ranges from a minimum of no shares to a maximum of 150% of the initial target number of performance shares awarded, depending on the level of the Company’s achievement of its financial performance objectives.

With respect to such performance shares, compensation expense is being accrued. During each future reporting period, such expense may be subject to adjustment based upon the Company's financial performance, which impacts the number of common shares that it expects to vest upon the completion of the performance period. The performance shares were valued at the closing market price of the Company’s common shares on the date of the grant. The vesting of such shares is determined at the end of the performance period.

During the first six months of fiscal 2017, one award for 5 performance shares under the 2007 Plan vested, of which 2 performance shares were tendered back to the Company to cover payroll costs. For the fiscal 2017 award, the Company granted 107 shares under the 2007 Plan to certain key employees. The award was split into two tranches, 69 performance shares and 38 shares of time-based restricted shares, with a grant date fair value of $7.45. The award vests over three years.

The Company has awarded restricted shares to its directors, officers, and other employees of the Company. The restricted shares were valued at the closing market price of the Company’s common shares on the date of the grant, and such value was recorded as unearned compensation. The unearned compensation is being amortized ratably over the restricted stock vesting period of one year or three years.

During the first six months of fiscal 2017, the company granted its non-employee directors 33 restricted shares under the 2016 Plan, with a grant date fair value of $8.05, which vest over one year. One award for 29 restricted shares vested.

If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately 363 shares that remain available for award at March 31, 2017. 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.

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Stock-based compensation under the 2007 Plan was $345 expense and $464 benefit during the first six months of fiscal 2017 and 2016, respectively and expense of $187 for the second quarter of fiscal 2017 and a benefit of $810 for the second quarter of fiscal 2016. As of March 31, 2017, there was $1,315 of total unrecognized compensation cost related to the performance shares and restricted shares awarded under the 2007 Plan. The Company expects to recognize this cost over the next 2.0 years.

8. 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 believe any such matters are material to its financial condition or results of operations. 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.

The Company is currently a defendant in a class action lawsuit filed in the Superior Court of California, County of Orange, alleging violations of California wage-and-hour laws, rules and regulations pertaining primarily to failure to accurately calculate and pay hourly and overtime wages; failure to provide meal periods; failure to authorize and permit rest periods; failure to indemnify necessary expenditures; failure to timely pay wages; and unfair competition. Although the Company records reserves for legal disputes and other matters in accordance with generally accepted accounting principles in the United States of America, ("GAAP"), the ultimate outcomes of these types of matters are inherently uncertain. Actual results may differ significantly from current estimates. Given the current status of this matter, Company has not concluded that a loss is probable, as such an estimate of a loss has not been recorded.

The Company's Cleveland, Ohio location had an Occupational Safety and Health Administration ("OSHA") inspection at the facility on September 1, 2016. This inspection resulted in OSHA issuing citations to the location. Since the inspection, SIFCO has abated or is in the process of abating all issues identified. These findings resulted in penalties to be assessed in the amount of $127 as of March 31, 2017.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain various forward-looking statements and includes assumptions concerning the Company’s operations, future results and prospects. These forward-looking statements are based on current expectations and are subject to risk and uncertainties. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides this cautionary statement identifying important economic, political and technological factors, among others, the absence or effect of which could cause the actual results or events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. Such factors include the following: (1) the impact on business conditions in general, and on the demand for products in the Aerospace and Energy ("A&E") industries in particular, of the global economic outlook, including the continuation of military spending at or near current levels and the availability of capital and liquidity from banks and other providers of credit; (2) the future business environment, including capital and consumer spending; (3) competitive factors, including the ability to replace business that may be lost; (4) metals and commodities price increases and the Company’s ability to recover such price increases; (5) successful development and market introduction of new products and services; (6) continued reliance on consumer acceptance of regional and business aircraft powered by more fuel efficient turboprop engines; (7) continued reliance on military spending, in general, and/or several major customers, in particular, for revenues; (8) the impact on future contributions to the Company’s defined benefit pension plans due to changes in actuarial assumptions, government regulations and the market value of plan assets; (9) stable governments, business conditions, laws, regulations and taxes in economies where business is conducted; and (10) the ability to successfully integrate businesses that may be acquired into the Company’s operations.

The Company is engaged in the production of forgings and machined components primarily for the A&E markets. The processes and services include forging, heat-treating and machining. The Company operates under one business segment.

The Company endeavors to plan and evaluate its business operations while taking into consideration certain factors including the following: (i) the projected build rate for commercial, business and military aircraft, as well as the engines that power such aircraft; (ii) the projected maintenance, repair and overhaul schedules for commercial, business and military aircraft, as well as the engines that power such aircraft; and (iii) the projected build rate and repair for industrial turbines.

The Company operates within a cost structure that includes a significant fixed component. Therefore, higher net sales volumes are expected to result in greater operating income because such higher volumes allow the business operations to better leverage the fixed component of their respective cost structures. Conversely, the opposite effect is expected to occur at lower net sales and related production volumes.

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A. Results of Operations

Six Months Ended March 31, 2017 compared with Six Months Ended March 31, 2016

Overview

The Company produces forged components for (i) turbine engines that power commercial, business and regional aircraft as well as military aircraft and armored military vehicles; (ii) airframe applications for a variety of aircraft; (iii) industrial gas and steam turbine engines for power generation units; and (iv) other commercial applications.

Net Sales

Net sales for the first six months of fiscal 2017 increased 11.6% to $62.8 million, compared with $56.2 million in the comparable period of fiscal 2016. Net sales comparative information for the first six months of fiscal 2017 and 2016 is as follows:

(Dollars in millions)	Six Months Ended March 31,				Increase
Net Sales	2017		2016
Aerospace components for:
Fixed wing aircraft	$	31.5	$	29.4	$	2.1
Rotorcraft	10.5		9.1		1.4
Energy components for power generation units	16.3		14.5		1.8
Commercial product and other revenue	4.5		3.2		1.3
Total	$	62.8	$	56.2	$	6.6

The increase in fixed wing aircraft sales is primarily due to changes in build demand of Rolls Royce AE Engines due to a buffering plan for a customer plant closure, and changes in build demand of SAAB for the Boeing 787 and UTAS Troy for the JSF F35. These increases were partially offset by a decline in demand of the 737NG and V2500 programs. Energy components for power generation units increased by $1.8 million compared with the same period last year mainly due to higher market demand of turbine engines at our Maniago location. Rotorcraft sales increased to $10.5 million in the first six months of fiscal 2017 from $9.1 million in the comparable period of fiscal 2016 due to our customer's recovery from inventory destocking efforts in the first six months of 2016. The increase in commercial product and other revenue sales is largely driven by an increase in the Hellfire II missile program due to the timing of orders.

Commercial net sales were 56.6% of total net sales and military net sales were 43.4% of total net sales in the first six months of fiscal 2017, compared with 62.2% and 37.8%, respectively, in the comparable period in fiscal 2016.  Military net sales increased by $6.1 million to $27.3 million in the first six months of fiscal 2017, compared with $21.2 million in the comparable period of fiscal 2016, primarily due to the Hellfire II missile program, a customer's buffering plan for a plant closure and recovery from inventory destocking.  Commercial net sales increased $0.6 million to $35.6 million in the first six months of fiscal 2017, compared with $35.0 million in the comparable period of fiscal 2016 primarily due to the changes in build rates to the programs mentioned above. 

Cost of Goods Sold

Cost of goods sold increased by $4.4 million, or 8.7%, to $54.9 million, or 87.5% of net sales, during the first half of fiscal 2017, compared with $50.6 million or 89.9% of net sales, in the comparable period of fiscal 2016. The increase was due primarily to higher volumes as previously mentioned, as well as higher cycle count adjustments, $0.4 million, employee severance charges $0.3 million and lower of cost or market charges, $0.2 million.

Gross Profit

Gross profit increased $2.2 million to $7.8 million during the first six months of fiscal 2017, compared with $5.7 million in the comparable period of fiscal 2016. Gross margin percent of sales was 12.5% during the first six months of fiscal 2017, compared with 10.1% in the comparable period in fiscal 2016. The increase in gross profit was primarily due to higher sales volume.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $9.7 million, or 15.5% of net sales during the first six months of fiscal 2017, compared with $8.8 million, or 15.6% of net sales in the comparable period of fiscal 2016. The increase in selling, general and administrative expenses is primarily due to higher expansion costs related to one of the Company's plant locations, $1.5 million, higher long-term incentive compensation, $0.8 million, higher retention costs of $0.3 million, partially offset by lower legal and professional expense, $1.2 million, associated with the late filing of SIFCO's fiscal 2015 annual report on Form 10-K and lower information technology expenses in the current year, $0.5 million.

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Amortization of Intangibles

Amortization of intangibles decreased $0.2 million to $1.1 million during the first six months of fiscal 2017, compared with $1.3 million in the comparable period of fiscal 2016. The decrease was due to the completion of the estimated useful life assigned to a below-market lease and non-compete agreement at one of the Company’s locations in the prior period.

Other/General

Interest expense increased $0.4 million to $1.2 million in the first six months of fiscal 2017, compared with $0.8 million in the same period in fiscal 2016. The increase is primarily due to a $0.2 million write-off of deferred financing costs associated with the Company’s Amended and Restated Agreement with its lender and higher interest expense related to increased borrowing on the Company's revolving credit facility. See Note 4 - Debt - for further information.

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 2017 and 2016. The Company entered into an interest rate swap as discussed in Note 1 of the notes to the unaudited consolidated condensed statements. The interest rate swap in the prior year was entered into at the end of March 2016:

	Weighted Average Interest Rate Six Months Ended March 31,				Weighted Average Outstanding Balance Six Months Ended March 31,
	2017		2016		2017	2016
Revolving credit agreement	4.6	%	3.4	%	$ 22.7 million	$ 14.6 million
Term note	5.0	%	3.3	%	$ 7.2 million	$ 18.9 million
Foreign term debt	3.0	%	2.5	%	$ 9.8 million	$ 12.4 million

Other income, net, consists principally of $0.2 million of rental income earned from the lease of the Company's Cork, Ireland facility in both the first six months of fiscal 2017 and 2016.

Income Taxes

The Company’s effective tax rate in the first six months of fiscal 2017 was (6)%, compared with 43% in the comparable period in fiscal 2016. This decrease is primarily attributable to a year-to-date U.S. loss with no tax benefit due to a valuation allowance in fiscal 2017. Additionally, in fiscal 2016, the effective tax rate was higher in comparison to fiscal 2017 driven by discrete tax benefits of $461 primarily related to tax legislation enacted during the first quarter of fiscal 2016, applied against a year-to-date loss. The effective tax rate differs from the U.S. federal statutory rate primarily due 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.

Net Loss

Net loss was $4.3 million during the first six months of fiscal 2017, compared with net loss of $2.9 million in the comparable period of fiscal 2016.  Net loss increased primarily due to the items noted above.

Three Months March 31, 2017 compared with Three Months Ended March 31, 2016

Net Sales

Net sales for the second quarter of fiscal 2017 increased 7.7% to $31.3 million, compared with $29.1 million in the comparable period of fiscal 2016. Net sales comparative information for the second quarter of fiscal 2017 and 2016 is as follows:

(Dollars in millions)	Three Months Ended March 31,				Increase (Decrease)
Net Sales	2017		2016
Aerospace components for:
Fixed wing aircraft	$	16.8	$	15.5	$	1.3
Rotorcraft	5.6		4.6		1.0
Energy components for power generation units	7.8		7.5		0.3
Commercial product and other revenue	1.1		1.5		(0.4		)
Total	$	31.3	$	29.1	$	2.2

Total net sales for the Company increased $2.2 million in the second quarter of fiscal 2017 compared with the comparable period of fiscal 2016. The increase in fixed wing aircraft sales is primarily due to changes in build demand of SAAB for the Boeing 787, UTAS Troy for the JSF F35 and Hamilton Sundstrand for military spares. These increases were partially offset by a decline in demand of the 737NG and V2500 programs. Rotorcraft sales increased due to our customer's recovery from inventory destocking

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efforts in the second quarter of 2016. Energy components for power generation units increased by $0.3 million compared to the same period last year due to higher market demand of turbine engines at our Maniago location. Commercial product and other revenue decreased mainly due to the timing of the orders with the Hellfire II missile program.

Commercial net sales were 59.5% of total net sales and military net sales were 40.5% of total net sales in the second quarter of fiscal 2017, compared with 61.9% and 38.1%, respectively, in the comparable period of fiscal 2016.  Military net sales increased by $1.6 million to $12.7 million in the second quarter of fiscal 2017, compared with $11.1 million in the comparable period of fiscal 2016, primarily due to the change in build rates for the JSF F35, spares and a customer's buffering plan for a plant closure and recovery from inventory destocking.  Commercial net sales increased $0.6 million to $18.6 million in the second quarter of fiscal 2017, compared with $18.0 million in the comparable period of fiscal 2016 primarily due to the changes in build rates to the programs mentioned above. 

Cost of Goods Sold

Cost of goods sold increased by $2.1 million, or 8.3% to $27.6 million, or 88.3% of net sales, during the second quarter of fiscal 2017, compared with $25.5 million or 87.7% of net sales, in the comparable period of fiscal 2016. The increase was due primarily to higher volumes as previously mentioned, as well as inventory cycle count adjustments, $0.2 million, lower of cost or market charges of $0.2 million and employee severance costs of $0.1 million, partially offset by lower excess and obsolescence charges, $0.3 million, as a result of the Company’s efforts to reduce inventory.

Gross Profit

Gross profit increased $0.1 million to $3.7 million during the second quarter of fiscal 2017, compared with $3.6 million in the comparable period of fiscal 2016. Gross margin was 11.7% during the second quarter of fiscal 2017, compared with 12.3% in the comparable period in fiscal 2016. The increase in gross profit was primarily due to higher sales volume, partially offset by inventory adjustments and severance costs as mentioned above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $4.4 million, or 14.0% of net sales, during the second quarter of fiscal 2017, compared with $3.1 million, or 10.8% of net sales, in the comparable period of fiscal 2016. The increase in selling, general and administrative expenses is primarily due to higher long-term incentive compensation of $1.0 million, higher spending associated with the expansion of one of the Company’s plant locations, $0.7 million, partially offset by lower legal and professional fees of $0.5 million, associated with the late filing of SIFCO's fiscal 2015 annual report on Form 10-K.

Amortization of Intangibles

Amortization of intangibles was $0.6 million during the second quarter of fiscal 2017 and fiscal 2016.

Other/General

Interest expense was $0.5 million in the second quarter of fiscal 2017, compared with $0.4 million in the same period in fiscal 2016.

The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreement in the second quarter of both fiscal 2017 and 2016:

	Weighted Average Interest Rate Three Months Ended December 31,				Weighted Average Outstanding Balance Three Months Ended December 31,
	2017		2016		2017	2016
Revolving credit agreement	4.8	%	3.6	%	$ 25.0 million	$ 12.6 million
Term note	5.8	%	3.4	%	$ 4.6 million	$ 18.6 million
Foreign term debt	3.7	%	2.3	%	$ 9.3 million	$ 12.4 million

Other income, net, consists principally of $0.1 million of rental income earned from the lease of the Company's Cork, Ireland facility in both the second quarter of fiscal 2017 and 2016.

Income Taxes

The Company’s effective tax rate in the second quarter of fiscal 2017 is 5%, compared with 44% in the comparable period in fiscal 2016. This decrease is primarily attributable to a U.S. loss with no tax benefit due to a valuation allowance in fiscal 2017. Additionally, in fiscal 2016,the effective tax rate was higher in comparison to fiscal 2017 primarily related to an increase in U.S. federal tax credits applied against forecasted domestic results in fiscal 2016 due to tax effects of legislation enacted during fiscal 2016. The effective tax rate differs from the U.S. federal statutory rate due primarily to the valuation allowance against the

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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.

Net Loss

Net loss was $1.7 million during the second quarter of fiscal 2017, compared with net loss of $0.3 million in the comparable period of fiscal 2016. Net loss increased primarily due to the items noted above.

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 it 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.

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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,
	2017			2016			2017			2016
Net loss	$	(1,657	)	$	(299	)	$	(4,266	)	$	(2,897	)
Adjustments:
Depreciation and amortization expense	2,424			2,588			4,939			5,366
Interest expense, net	525			414			1,189			813
Income tax expense (benefit)	(83		)	(239		)	244			(2,175		)
EBITDA	1,209			2,464			2,106			1,107
Adjustments:
Foreign currency exchange loss, net (1)	12			20			17			34
Other income, net (2)	(107		)	(107		)	(214		)	(214		)
(Gain) loss on disposal of operating assets (3)	—			30			(6		)	32
Inventory purchase accounting adjustments (4)	—			—			—			266
Equity compensation expense (5)	187			(810		)	345			(464		)
Acquisition transaction-related expenses (6)	—			(5		)	—			(94		)
LIFO impact (7)	118			(41		)	225			(8		)
Orange expansion (8)	931			210			1,883			387
Executive search (9)	—			224			—			224
Adjusted EBITDA	$	2,350		$	1,985		$	4,356		$	1,270

(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, primarily rental income from the Company's Irish subsidiary.

(3) Represents the difference between the proceeds from the sale of operating equipment and the carrying value shown on the Company’s books.

(4) Represents accounting adjustments to value inventory at fair market value associated with the acquisition of a business that was charged to cost of goods sold when the inventory was sold.

(5) Represents the equity-based compensation benefit and expense recognized by the Company under its 2007 Long-Term Incentive Plan due to granting of awards, awards not vesting and/or forfeitures.

(6) Represents transaction-related costs such as legal, financial, tax due diligence expenses, valuation services costs, and executive travel that are required to be expensed as incurred.

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

(8) Represents costs related to expansion of one of the plant locations that are required to be expensed as incurred.

(9) Represents cost incurred for executive search as mentioned in its Form 8-K filing on March 18, 2016.

B. Liquidity and Capital Resources

Cash and cash equivalents were $1.4 million at March 31, 2017 compared with $0.5 million at September 30, 2016. At March 31, 2017, approximately $0.9 million of the Company’s cash and cash equivalents was in the possession of its non-U.S. subsidiaries.

Operating Activities

The Company’s operating activities from operations provided $5.3 million of cash in the first six months of fiscal 2017, compared with $11.8 million of cash provided by operating activities in the first six months of fiscal 2016. The cash provided by operating activities from operations in the first six months of fiscal 2017 was primarily due to depreciation and amortization of $4.9 million, a net source of working capital of $3.5 million, and $1.1 million of other non-cash items, such as equity based compensation and LIFO effect, partially offset by net loss of $4.3 million. The cash provided for working capital was primarily due to a $2.6 million decrease in inventory as a result of management's focus on inventory management.

The Company’s operating activities from operations provided $11.8 million of cash in the first six months of fiscal 2016. The cash provided by operating activities from continuing operations in the first six months of fiscal 2016 was primarily due to a $10.1 million reduction of working capital. Cash provided by working capital was primarily due to a $6.4 million decrease in accounts receivable and $4.8 million from extended accounts payable partially offset by the net loss of $2.9 million. The Company also

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benefited from $4.6 million on non-cash items, such as depreciation and amortization expense, LIFO effect and equity-based compensation expense.

Investing Activities

Cash used for investing activities of operations was $0.9 million in the first six months of fiscal 2017, compared with $1.2 million in the first six months of fiscal 2016. In addition to the $0.9 million expended during the first six months of fiscal 2017, $0.3 million was committed for future capital expense as of March 31, 2017. The Company anticipates that total fiscal 2017 capital expenditures will be within the range of $2.0 million to $2.5 million and will relate principally to the further enhancement of production and product offering capabilities, operating cost reductions and expansion of one of the Company’s plant locations.

Financing Activities

Cash used by financing activities was $3.5 million in the first six months of fiscal 2017, compared with cash used for financing activities of $10.3 million in the first six months of fiscal 2016.

On November 9, 2016, the Company entered into an Amended and Restated Credit and Security agreement (“Credit Facility”) with its Lender. The new Credit Facility matures on June 25, 2020 and consists of senior secured loans in the aggregate principal amount of up to $39.9 million. The Credit Facility is comprised of (i) a senior secured revolving credit facility of a maximum borrowing amount of $35.0 million, including swing line loans and letters of credit provided by the Lender and (ii) senior secured term loan facility in the amount of $4.9 million (the “Term Facility”). The new Term Facility is repayable in monthly installments of $0.1 million which began December 1, 2016. The terms of the Credit Facility contain both a lockbox arrangement and a subjective acceleration clause. As a result, the amounts outstanding on the revolving credit facility are classified as a short term liability. The amounts borrowed under the Credit Facility were used to repay the amounts previously outstanding under the Company’s existing Credit Agreement as of September 30, 2016 and for working capital, general corporate purposes and to pay fees and expenses associated with this transaction. In connection with entering into the Credit Facility, the Company terminated its interest rate swap agreement with the Lender. See Note 4 - Debt - for further discussion. The Company entered into its First Amendment Agreement ("First Amendment") to the Credit Facility on February 16, 2017. The First Amendment assigned its Lender as Administrative Agent and assigned portion of its Credit Facility to another participating Lender.

Borrowings will bear interest at the LIBOR rate, prime rate, or the eurocurrency reference rate depending on the type of loan requested by the Company, in each case, plus the applicable margin as set forth in the Amended and Restated Agreement. The revolver has a rate based on LIBOR plus a 3.75% spread and a prime rate which resulted in a weighted average rate of 4.7% at March 31, 2017 and the term loan has a rate of 5.1% at March 31, 2017, which was based on LIBOR plus a 4.25% spread. This rate becomes an effective fixed rate of 5.8% after giving effect to the interest rate swap agreement. There is also a commitment fee ranging from 0.15% to 0.375% to be incurred on the unused balance.

Under the Company's Credit Facility, the Company is subject to certain customary loan covenants. These include, without limitation, covenants that require maintenance of certain specified financial ratios, including that the Company meeting a minimum EBITDA and maintaining a minimum fixed charge coverage ratio (to start on September 30, 2017). In the event of a default, we may not be able to access our revolver, which could impact the ability to fund working capital needs, capital expenditures and invest in new business opportunities.

The Company was in compliance with loan covenants required to be met as of March 31, 2017.

Prior to the new Credit Facility, on June 26, 2015, the Company entered a Credit and Security Agreement (the "2015 Credit Agreement") with its Lender. The credit facility was comprised of (i) a five-year revolving credit facility with a maximum borrowing amount of up to $25.0 million, which reduced to $20.0 million on January 1, 2016, and (ii) a five-year term loan of $20.0 million.  Amounts borrowed under the credit facility were secured by substantially all the assets of the Company and its U.S. subsidiaries and a pledge of 65% of the stock of its non-U.S. subsidiaries. The term loan was repayable in quarterly installments of $714 starting September 30, 2015. The amounts borrowed under the 2015 Credit Agreement were used to repay the Company's previous revolver and term note, to fund the acquisition of the Maniago, Italy location and for working capital and general corporate purposes. The 2015 Credit Agreement also had an accordion feature, which allowed the Company to increase the availability by up to $15.0 million upon consent of the existing lenders or upon additional lenders being joined to the facility. Borrowings bore interest at the LIBOR rate, prime rate, or the eurocurrency reference rate depending on the type of loan requested by the Company, in each case, plus the applicable margin as set forth in the 2015 Credit Agreement.

The Company incurred debt issuance costs in connection with its 2015 Credit Agreement in the amount of $0.7 million. However, with the Credit Facility, the Company incurred an additional $0.5 million of costs and wrote off $0.2 million of debt issuance costs as it relates to the term note. See Note 4 - Debt - for further discussion.

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Future cash flows from the Company’s operations will be used to pay down amounts outstanding under the Amended and Restated Agreement. The Company believes it has adequate cash/liquidity available to finance its operations from the combination of (i) the Company’s expected cash flows from operations and (ii) funds available under the Credit Facility.

C. Impact of Recently Issued Accounting Standards

In May 2014, and as subsequently updated (Accounting Standards Update ("ASU") 2016-20 being most recent), the Financial Accounting Standards Board ("FASB") issued new accounting guidance that creates a single revenue recognition model, while clarifying the principles for recognizing revenue. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods. The Company will adopt the new guidance on October 1, 2018. The Company is planning a bottoms up approach to analyze the standard's impact on its revenues by looking at historical policies and practices and identifying the differences from applying the new standard to its revenue stream. The Company has not determined the effect of the standard to its consolidated condensed financial statements.

In March 2016, the FASB issued ASU 2016-09, which makes a number of changes meant to simplify and improve accounting for shared-based payments. The ASU will be effective for the Company for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has considered the potential implications of adoption of the ASU and due to the valuation allowance recorded at September 30, 2016 in the U.S., the Company does not expect a material impact from a tax perspective. The Company is still evaluating other non-tax components it may have on its consolidated condensed financial statements.

In October 2016, the FASB issued ASU 2016-16, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory. This ASU will be effective for the Company for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact it may have on its consolidated condensed financial statements together with evaluating the adoption date.

In November 2016, the FASB issued ASU 2016-18 requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash would be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods. Early adoption is permitted. The Company is currently evaluating its plans regarding the adoption, but does not feel that this ASU is expected to have a material impact to the consolidated condensed statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations, which clarified existing guidance on the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Early adoption is permitted and the guidance is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted as of the beginning of the annual reporting period in which the ASU was issued. The Company is currently evaluating the potential impact on its consolidated condensed financial statements.

In March 2017, the FASB issued ASU 2017-07, which relates to pension related costs that require an entity to report the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs. The other components of the net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside of any subtotal of operating income. Additionally, only the service cost component will be eligible for capitalization in assets. The ASU is effective for October 1, 2018, early adoption is permitted and the ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost in the income statement and prospectively for the capitalization of the service cost component. The amendment allows for a practical expedient that permits an employer to use the amounts disclosed in its pension and other post-retirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. The Company will need to disclose that the practical expedient was used. The Company is currently evaluating the impact it may have on its consolidated condensed financial statements, together with evaluating the adoption date.

D. Recently Adopted Accounting Standards

In January 2017, the FASB issued ASU 2017-04, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The Company performs Step 1 of the annual or interim goodwill impairment test by comparing

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the fair value of a reporting unit with its carrying amount. If the carrying amount exceeds the fair value, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the fair value, not to exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This ASU must be applied prospectively and is effective for any annual and interim goodwill impairment test in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company has elected to early adopt.

Item 4. Controls and Procedures

As defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported on a timely basis, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s disclosure controls and procedures include components of the Company’s internal control over financial reporting. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management of the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) as of March 31, 2017 (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were not effective, as a result of the continuing existence of the material weaknesses in the Company's internal controls over financial reporting described in Item 9A of the Company's Annual Report.

The Company is in the process of designing and implementing improved controls to remediate the material weaknesses that continued to exist as of March 31, 2017.

In fiscal 2016, the Company identified the following material weaknesses:

• Inadequate journal entry approval controls related to manual journal entries, allowing the posting of unapproved manual journal entries.

• Key controls within business and IT processes were not designed and operating effectively at Maniago.

• Key controls within IT general and application controls, including controls related to the testing of completeness and accuracy of system-generated reports, for domestic operations were not operating effectively.

• Multiple key controls within financial reporting, inventory, revenue, account reconciliations and cash receipts application process for certain domestic locations were not operating effectively.

Remediation Plan for Material Weakness in Internal Control over Financial Reporting

Management and the Company’s Board of Directors are committed to improving the Company’s overall system of internal controls over financial reporting. The Company is in the process of designing and implementing additional controls and improving existing controls to remediate the material weaknesses that existed as of September 30, 2016, as set forth above.

With respect to the approval of manual journal entries, the Company is in process of reviewing alternatives to the automated workflow process to route manual entries to the appropriate approver.

With respect to evaluating the Company’s Maniago business processes, the Company reviewed its key controls and has provided training to the Maniago employees. Additionally, the Company will be reviewing key controls throughout the year. With respect to Maniago’s IT controls, the Company is in the process of evaluating changes to its IT environment, but does not expect to completely remediate its Maniago IT controls this fiscal year.

With respect to remediating control deficiencies with the IT control environment, the Company is implementing security and access reviews to ensure they are timely and appropriate and expanding the segregation of duties reviews. The Company is also implementing a periodic review of all system changes in its ERP systems to ensure all changes are properly documented and authorized. The Company is making progress, but does not expect to completely remediate its IT control deficiencies in the current fiscal year.

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With respect to remediating control deficiencies for financial reporting, inventory, revenue, account reconciliation and cash receipt application, the Company reviewed its key controls and has provided training to its employees. In fiscal 2017, the Company has also upgraded its Finance staff and has implemented enhanced monitoring controls.

The actions that we are taking are subject to ongoing senior management review as well as oversight by the Audit Committee of the Board of Directors. Although we plan to complete this remediation as quickly as possible, we cannot, at this time, estimate how long it will take.

Changes in Internal Control over Financial Reporting and other Remediation

Except as for the remediation items described in Item 4 related to prior year findings, there have been no changes in the Company’s internal controls over financial reporting during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Part II. Other Information

Items 1A, 3, 4 and 5 are not applicable or the answer to such items is negative; therefore, the items have been omitted and no reference is required in this Quarterly Report.

Item 1. Legal Proceedings

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 and does not believe any such matters are material to its financial condition or results of operations. 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. For a more complete description of our outstanding material legal proceedings, see Note 8 - Commitments and Contingencies.

Item 6. (a) Exhibits

The following exhibits are filed with this report or are incorporated herein by reference to a prior filing in accordance with Rule 12b-32 under the Securities and Exchange Act of 1934 (Asterisk denotes exhibits filed with this report.).

Exhibit No.	Description
2.1	Stock Purchase Agreement between Riello Investimenti Partners SGR S.p.A., Giorgio Visentini, Giorgio Frassini, Giancarlo Sclabi and Matteo Talmassons and SIFCO Italy Holdings S.R.L (a wholly-owned subsidiary of SIFCO Industries Inc.) dated March 16, 2015 filed as Exhibit 2.1 to the Company’s Form 8-K dated July 2, 2015, and incorporated herein by reference
2.2	Amendment to the Stock Purchase Agreement Riello Investimenti Partners SGR S.p.A., Giorgio Visentini, Giorgio Frassini, Giancarlo Sclabi and Matteo Talmassons and SIFCO Italy Holdings S.R.L (a wholly-owned subsidiary of SIFCO Industries Inc.) dated June 30, 2015 filed as Exhibit 2.2 to the Company’s Form 8-K dated July 2, 2015, and incorporated herein by reference
3.1	Third Amended Articles of Incorporation of SIFCO Industries, Inc., filed as Exhibit 3(a) of the Company’s Form 10-Q dated March 31, 2002, and incorporated herein by reference
3.2	SIFCO Industries, Inc. Amended and Restated Code of Regulations dated January 28, 2016, filed as Exhibit 3.2 of the Company’s Form 10-K dated September 30, 2015, and incorporated herein by reference
9.1	Voting Trust Agreement dated January 31, 2013, filed as Exhibit 9.1 to the Company’s Form 10-Q dated December 31, 2012 and incorporated herein by reference
9.2	Voting Trust Extension Agreement dated January 15, 2015, filed as Exhibit 9.2 to the Company's Form 10-Q dated December 31, 2014 and incorporated herein by reference
9.3	Voting Trust Agreement dated January 31, 2017, filed as Exhibit 9.3 to the Company's Form 10-Q dated December 31, 2016 and incorporated herein by reference
10.1	SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the Company’s Proxy and Notice of 2008 Annual Meeting to Shareholders dated December 14, 2007, and incorporated herein by reference
10.2	Letter Agreement between the Company and Jeffrey P. Gotschall, dated August 12, 2009 filed as Exhibit 10.1 of the Company’s Form 8-K dated August 12, 2009 and incorporated herein by reference

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10.3	Amendment No. 1 to the SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the Company’s Proxy and Notice of 2011 Annual Meeting to Shareholders dated December 15, 2010, and incorporated herein by reference
10.4	Change in Control Agreement and Separation Agreement between the Company and Peter W. Knapper, effective June 29, 2016, filed as Exhibit 10.2 to the Company's Form 8-K dated June 17, 2016, and incorporated herein by reference
10.5	Change in Control Agreement between the Company and Salvatore Incanno, dated May 11, 2015, filed as Exhibit 10.1 to the Company's Form 8-K dated May 11, 2015, and incorporated herein by reference
10.6	Form of SIFCO Industries, Inc. Long-term incentive plan performance share award, filed as Exhibit 10.6 to the Company's Form 10-Q dated May 16, 2016, and incorporated herein by reference
10.7	Form of SIFCO Industries, Inc. Long-term incentive plan restricted share award, filed as Exhibit 10.7 to the Company's Form 10-Q dated May 16, 2016, and incorporated herein by reference
10.8	Award agreement, dated June 1, 2016, between the SIFCO Industries, Inc. and Salvatore Incanno, filed as Exhibit 10.1 to the Company's Form 8-K dated June 3, 2016, and incorporated herein by reference
10.9	Award agreement between the Company and Peter W. Knapper, granted June 29, 2016, filed as Exhibit 10.1 to the Company's Form 8-K dated June 17, 2016, and incorporated herein by reference
10.10	Amended and Restated Credit and Security Agreement, dated November 9, 2016, by and among SIFCO Industries, Inc., the Lenders named therein and KeyBank National Association, as Lead Arranger, Sole Book Runner, Administrative Agent, Swing Line Lender and Issuing Lender, filed as Exhibit 10.1 to the Company's Form 8-K dated November 15, 2016, and incorporated herein by reference
*10.11	First Amendment to the Amended and Restated Credit and Security Agreement, dated February 16, 2017, by and among SIFCO Industries, Inc., the Lenders named therein; KeyBank National Association, as Lead Arranger, Sole Book Runner, Administrative Agent, Swing Line Lender and Issuing Lender; and Presidential Financial Corporation, as Assignee.
10.12	Amendment and Restatement to the SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the Company’s Proxy and Notice of 2017 Annual Meeting to Shareholders dated December 6, 2016, and incorporated herein by reference
10.13	Form of SIFCO Industries, Inc. Long-term incentive plan performance share award, filed as Exhibit 10.15 to the Company's Form 10-Q dated January 31, 2017, and incorporated herein by reference
10.14	Form of SIFCO Industries, Inc. Long-term incentive plan restricted share award, filed as Exhibit 10.16 to the Company's Form 10-Q dated January 31, 2017, and incorporated herein by reference
10.15	Form of SIFCO Industries, Inc. Long-term incentive plan restricted share award, filed as Exhibit 10.17 to the Company's Form 10-Q dated January 31, 2017, and incorporated herein by reference
14.1	Code of Ethics, filed as Exhibit 14.1 of the Company’s Form 10-K dated September 30, 2003, and incorporated herein by reference
*31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) / 15d-14(a)
*31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) / 15d-14(a)
*32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
*32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
*101	The following financial information from SIFCO Industries, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 filed with the SEC on May 5, 2017, formatted in XBRL includes: (i) Consolidated Condensed Statements of Operations for the fiscal periods ended March 31, 2017 and 2016, (ii) Consolidated Condensed Statements of Comprehensive Income for the fiscal periods ended March 31, 2017 and 2016, (iii) Consolidated Condensed Balance Sheets at March 31, 2017 and September 30, 2016, (iv) Consolidated Condensed Statements of Cash Flow for the fiscal periods ended March 31, 2017 and 2016, and (iv) the Notes to the Consolidated Condensed Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SIFCO Industries, Inc.
	(Registrant)
Date: May 5, 2017	/s/ Peter W. Knapper
	Peter W. Knapper
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: May 5, 2017	/s/ Salvatore Incanno
	Salvatore Incanno
	Chief Financial Officer
	(Principal Financial Officer)

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EX-10.11

FIRST AMENDMENT AGREEMENT

This FIRST AMENDMENT AGREEMENT (this “Amendment”) is made as of the 16^th day of February, 2017 among:

(a)    SIFCO INDUSTRIES, INC., an Ohio corporation (the “Borrower”);

(b)    the Lenders, as defined in the Credit Agreement, as hereinafter defined; and

(c)    KEYBANK NATIONAL ASSOCIATION, as the administrative agent for the Lenders under the Credit Agreement (the “Administrative Agent”).

WHEREAS, the Borrower, the Administrative Agent and the Lenders are parties to that certain Amended and Restated Credit and Security Agreement, dated as of November 9, 2016 (as the same may from time to time be amended, restated or otherwise modified, the “Credit Agreement”);

WHEREAS, the Borrower, the Administrative Agent and the Lenders desire to amend the Credit Agreement to modify certain provisions thereof and add certain provisions thereto;

WHEREAS, each capitalized term used herein and defined in the Credit Agreement, but not otherwise defined herein, shall have the meaning given such term in the Credit Agreement; and

WHEREAS, unless otherwise specifically provided herein, the provisions of the Credit Agreement revised herein are amended effective as of the date of this Amendment;

NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Borrower, the Administrative Agent and the Lenders agree as follows:

1.    Amendment to Definitions in the Credit Agreement. Section 1.1 of the Credit Agreement is hereby amended to delete the definitions of “Bank Product Obligations”, “Borrowing Base”, “Required Lenders” and “Reserve” or “Reserves” therefrom and to insert in place thereof, respectively, the following:

“Bank Product Obligations” means all obligations, liabilities, contingent reimbursement obligations, fees and expenses owing by a Company to the Administrative Agent or any Lender (or an affiliate of a Lender) pursuant to or evidenced by the Bank Product Agreements, with respect to which such Lender (or an affiliate of a Lender) has delivered written notice to the Administrative Agent, in form and substance satisfactory to the Administrative Agent, by the later of the Closing Date or ten days following creation of a Bank Product, (i) describing such Bank Product and setting forth the applicable Bank Product Amount and the methodology to be used in calculating such amount, and (ii) agreeing to be bound by Section 9.8 hereof.

“Borrowing Base” means an amount equal to the total of the following:

(a)    up to eighty-five percent (85%) of the aggregate amount due and owing on Eligible Accounts Receivable of the Borrowing Base Companies; plus

(b)    eighty-five percent (85%) of the aggregate Eligible Foreign Account Receivable Covered Amount; plus

(c)    the lesser of:

(i)    the lesser of (A) up to seventy percent (70%) of the aggregate of the cost or market value (whichever is lower), as determined on a first in first out basis in accordance with GAAP, of the Eligible Inventory of the Borrowing Base Companies consisting of raw material, work-in-process and finished goods, and (B) up to eighty-five percent (85%) of the Appraised Inventory NOLV of the Eligible Inventory of the Borrowing Base Companies consisting of raw material, work-in-process and finished goods; or, in the case of subparts (A) and (B) above, such lower percentages as determined based on Inventory appraisals); or

(ii)    Twenty-Two Million Dollars ($22,000,000); minus

(d)    during the Availability Block Period, the Availability Block; minus

(e)    other Reserves, if any;

provided that, anything herein to the contrary notwithstanding, the Administrative Agent shall at all times have the right to reduce such percentages, dollar amount caps or other components of the Borrowing Base from time to time, in its Permitted Discretion; provided further that the Administrative Agent shall use its best efforts to provide notice to the Borrower of any changes to the Reserves or advance rates at least three days prior to any such change becoming effective.

“Required Lenders” means the holders, based upon each Lender’s Applicable Commitment Percentages, of at least fifty-one percent (51%) of an amount (the “Total Amount”) equal to the sum of:

(a)    (i) during the Commitment Period, the Maximum Revolving Amount, or (ii) after the Commitment Period, the Revolving Credit Exposure; and

(b)    the principal outstanding on the Term Loan;

provided that (A) the portion of the Total Amount held or deemed to be held by any Defaulting Lender or Insolvent Lender shall be excluded for purposes of making a determination of Required Lenders, and (B) if there shall be two or more unaffiliated Lenders (that are not

2

Defaulting Lenders or Insolvent Lenders), Required Lenders shall constitute at least two unaffiliated Lenders.

“Reserve” or “Reserves” means Bank Product Reserves, Hedge Agreement Reserves and any other amount that the Administrative Agent reserves, without duplication, pursuant to Section 2.13 hereof, against the Borrowing Base

2.    Additions to Definitions in the Credit Agreement. Section 1.1 of the Credit Agreement is hereby amended to add the following new definitions thereto:

“Bank Product Amount” means the maximum amount to be included as a Bank Product Reserve, which amount may be established or increased (by further written notice to the Administrative Agent from time to time) as long as no Default or Event of Default exists.

“Bank Product Reserves” means the aggregate amount of reserves against the Borrowing Base established by the Administrative Agent from time to time in its sole discretion with respect to Bank Product Obligations.

“Hedge Agreement Amount” means the maximum amount to be included as a Hedge Agreement Reserve, which amount may be established or increased (by further written notice to the Administrative Agent from time to time) as long as no Default or Event of Default exists.

“Hedge Agreement Obligations” all obligations and liabilities of a Company to the Administrative Agent or any Lender (or an affiliate of a Lender) pursuant to or evidenced by Hedge Agreements, with respect to which such Lender (or an affiliate of a Lender) has delivered written notice to the Administrative Agent, in form and substance satisfactory to the Administrative Agent, by the later of the Closing Date or ten days following the execution of a Hedge Agreement, (i) describing such Hedge Agreement and setting forth the applicable Hedge Agreement Amount and the methodology to be used in calculating such amount, and (ii) agreeing to be bound by Section 9.8 hereof.

“Hedge Agreement Reserves” means the aggregate amount of reserves against the Borrowing Base established by the Administrative Agent from time to time in its sole discretion with respect to Hedge Agreement Obligations.

3.    Amendment to Financial Statements, Collateral Reporting and Information. Section 5.3 of the Credit Agreement is hereby amended to delete subsection (a) therefrom and insert in place thereof the following:

(a)    Borrowing Base. The Borrower shall deliver to the Administrative Agent and the Lenders, as frequently as the Administrative Agent may request, but no less frequently than by 5:00 P.M. (Eastern time) on each Wednesday of each calendar week (or the next Business Day if such Wednesday is not a Business Day), a Borrowing Base

3

Certificate (for the period ending on the Friday of the week prior to the date such Borrowing Base Certificate is submitted) prepared and certified by a Financial Officer. Each such Borrowing Base Certificate shall be updated for all activity (sales, billings, collections, credits and similar information) impacting the accounts receivable of the Borrowing Base Companies from the date of the immediately preceding Borrowing Base Certificate to the date of such Borrowing Base Certificate. The amount of Eligible Inventory and the determination as to which accounts receivable constitute Eligible Accounts Receivable to be included on each Borrowing Base Certificate shall, absent a request from the Administrative Agent that such amounts be calculated more frequently, be the amount that is calculated and updated monthly pursuant to subsections (f) and (g) below.

4.    Amendment to Other Covenants Default Provisions. Section 8.3 of the Credit Agreement is hereby amended to delete subsection (a) therefrom and insert in place thereof the following:

(a)    If any Company shall fail or omit to perform and observe Section 5.4 hereof, and that Default shall not have been fully corrected within five days after the earlier of (i) any Financial Officer of such Company becomes aware of the occurrence thereof, or (ii) the giving of written notice thereof to the Borrower by the Administrative Agent that the specified Default is to be remedied.

5.    Amendment to Application of Proceeds Provisions. Section 9.8 of the Credit Agreement is hereby amended to delete subsection (b) therefrom and to insert in place thereof the following:

(b)    Payments Subsequent to Exercise of Remedies. After the exercise by the Administrative Agent or the Required Lenders of remedies under this Agreement or the other Loan Documents, all monies received by the Administrative Agent shall be applied, unless otherwise required by the terms of the other Loan Documents or by applicable law, as follows:

(i)    first, to the payment of all obligations (to the extent not paid by the Borrower) incurred by the Administrative Agent pursuant to Sections 11.6 and 11.7 hereof and to the payment of Related Expenses to the Administrative Agent;

(ii)    second, to the payment pro rata of (A) interest then accrued and payable on the outstanding Loans, (B) any fees then accrued and payable to the Administrative Agent, (C) any fees then accrued and payable to the Issuing Lender or the holders of the Letter of Credit Commitment in respect of the Letter of Credit Exposure, (D) any commitment fees, amendment fees and similar fees shared pro rata among the Lenders under this Agreement that are then accrued and payable, and (E) to the extent not paid by the Borrower, to the obligations incurred by the Lenders (other than the Administrative Agent) pursuant to Sections 11.6 and 11.7 hereof;

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(iii)    third, for payment of (A) principal outstanding on the Loans and the Letter of Credit Exposure, on a pro rata basis to the Lenders, based upon each such Lender’s Overall Commitment Percentage, provided that the amounts payable in respect of the Letter of Credit Exposure shall be held and applied by the Administrative Agent as security for the reimbursement obligations in respect thereof, and, if any Letter of Credit shall expire without being drawn, then the amount with respect to such Letter of Credit shall be distributed to the Lenders, on a pro rata basis in accordance with this subpart (iii), (B) the Hedge Agreement Obligations in the amount of the Hedge Agreement Reserves, and (C) the Bank Product Obligations in the amount of the Bank Product Reserves; with such payment to be pro rata among (A), (B) and (C) of this subpart (iii);

(iv)    fourth, to any remaining Secured Obligations (including such amount of Hedge Agreement Obligations and Bank Product Obligations that exceeds the amount of the Hedge Agreement Reserves and Bank Product Reserves, respectively); and

(v)    finally, any remaining surplus after all of the Secured Obligations have been paid in full, to the Borrower or to whomsoever shall be lawfully entitled thereto.

Each Lender hereby agrees to promptly provide all information reasonably requested by the Administrative Agent regarding any Bank Product Obligations owing to such Lender (or affiliate of such Lender) or any Hedge Agreement entered into by a Company with such Lender (or affiliate of such Lender), and each such Lender, on behalf of itself and any of its affiliates, hereby agrees to promptly provide notice to the Administrative Agent upon such Lender (or any of its affiliates) entering into any such Hedge Agreement or cash management services agreement. Amounts shall be applied to each category of Obligations set forth above until Full Payment thereof and then to the next category. If amounts are insufficient to satisfy a category, they shall be applied on a pro rata basis among the Obligations in the category. Amounts distributed with respect to any Hedge Agreement Obligations or Bank Product Obligations shall be the lesser of the applicable Hedge Agreement Amount or Bank Product Amount, as applicable, last reported to the Administrative Agent or the actual Hedge Agreement Obligations or Bank Product Obligations as calculated by the methodology reported to the Administrative Agent for determining the amount due. The Administrative Agent shall have no obligation to calculate the amount to be distributed with respect to any Hedge Agreement Obligations or Bank Product Obligations, and may request a reasonably detailed calculation of such amount from the applicable Lender (or affiliate of such Lender). If a Lender (or affiliate of such Lender) fails to deliver such calculation within five days following request by the Administrative Agent, the Administrative Agent may assume the amount to be distributed is the Hedge Agreement Amount or Bank Product Amount last reported to the Administrative Agent

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6.    Amendment to Schedule 1. The Credit Agreement is hereby amended to delete Schedule 1 (Commitments of Lenders) therefrom and to insert in place thereof a new Schedule 1 in the form of Schedule 1 hereto.

7.    Reallocation of Outstanding Amounts. On the date hereof, the Lenders shall make adjustments among themselves with respect to the Loans then outstanding and amounts of principal with respect thereto as shall be necessary, in the opinion of the Administrative Agent, in order to reallocate among such Lenders such outstanding amounts, based on the revised Commitments as set forth in the revised Schedule 1 hereto.

8.    Closing Deliveries. Concurrently with the execution of this Amendment, the Borrower shall:

(a)    deliver to the Administrative Agent, for delivery to Presidential Financial Corporation, a Revolving Credit Note and a Term Note, each in the amount specified in Schedule 1 to the Credit Agreement;

(b)    deliver to the Administrative Agent a fully-executed Assignment and Acceptance Agreement, among the Borrower, the Administrative Agent and Presidential Financial Corporation, in form and substance satisfactory to the Administrative Agent;

(c)    execute and deliver to Presidential Financial Corporation, the Fee Letter, and pay to Presidential Financial Corporation the fees stated therein;

(d)    cause each Guarantor of Payment to execute the attached Guarantor Acknowledgment and Agreement; and

(e)    pay all legal fees and expenses of the Administrative Agent in connection with this Amendment and any other Loan Documents.

9.    Representations and Warranties. The Borrower hereby represents and warrants to the Administrative Agent and the Lenders that (a) the Borrower has the legal power and authority to execute and deliver this Amendment; (b) the officers executing this Amendment have been duly authorized to execute and deliver the same and bind the Borrower with respect to the provisions hereof; (c) the execution and delivery hereof by the Borrower and the performance and observance by the Borrower of the provisions hereof do not violate or conflict with the Organizational Documents of the Borrower or any material law applicable to the Borrower or result in a breach of any provision of or constitute a default under any other material agreement, instrument or document binding upon or enforceable against the Borrower; (d) no Default or Event of Default exists, nor will any occur immediately after the execution and delivery of this Amendment or by the performance or observance of any provision hereof; (e) each of the representations and warranties contained in the Loan Documents is true and correct in all material respects as of the date hereof as if made on the date hereof, except to the extent that any such representation or warranty expressly states that it relates to an earlier date (in which case such representation or warranty is true and correct in all material respects as of such earlier date); (f) the Borrower is not aware of any claim

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or offset against, or defense or counterclaim to, the Borrower’s obligations or liabilities under the Credit Agreement or any other Related Writing; and (g) this Amendment constitutes a valid and binding obligation of the Borrower in every respect, enforceable in accordance with its terms, except as enforceability thereof may be limited by bankruptcy, insolvency, moratorium and similar laws and by equitable principles, whether considered at law or in equity.

10.    References to Credit Agreement and Ratification. Each reference to the Credit Agreement that is made in the Credit Agreement or any other Related Writing shall hereafter be construed as a reference to the Credit Agreement as amended hereby. Except as otherwise specifically provided herein, all terms and provisions of the Credit Agreement are confirmed and ratified and shall remain in full force and effect and be unaffected hereby. This Amendment is a Loan Document.

11.    Counterparts. This Amendment may be executed in any number of counterparts, by different parties hereto in separate counterparts and by facsimile or other electronic signature, each of which, when so executed and delivered, shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.

12.    Headings. The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

13.    Severability. Any provision of this Amendment that shall be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

14.    Governing Law. The rights and obligations of all parties hereto shall be governed by the laws of the State of Ohio, without regard to principles of conflicts of laws.

[Remainder of page intentionally left blank.]

12049378.2

7

JURY TRIAL WAIVER. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS, TO THE EXTENT PERMITTED BY LAW, EACH HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AMENDMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY THE ABILITY OF THE ADMINISTRATIVE AGENT OR THE LENDERS TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT AMONG THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS.

IN WITNESS WHEREOF, the parties have executed and delivered this Amendment in Cleveland, Ohio as of the date first set forth above.

SIFCO INDUSTRIES, INC.

By: /s/ Salvatore Incanno

Salvatore Incanno

Vice President and Chief Financial Officer

KEYBANK NATIONAL ASSOCIATION

   as the Administrative Agent and as a Lender

By: /s/ Michael P. Gutia

Michael P. Gutia

Vice President

Signature Page to

First Amendment Agreement

PRESIDENTIAL FINANCIAL CORPORATION

By: /s/ Dennis Schlesner

Dennis Schlesner

President

Signature Page to

First Amendment Agreement

GUARANTOR ACKNOWLEDGMENT AND AGREEMENT

The undersigned consent and agree to and acknowledge the terms of the foregoing First Amendment Agreement dated as of February 16, 2017. The undersigned further agree that the obligations of the undersigned pursuant to the Guaranty of Payment executed by the undersigned are hereby ratified and shall remain in full force and effect and be unaffected hereby.

The undersigned hereby waive and release the Administrative Agent and the Lenders and their respective directors, officers, employees, attorneys, affiliates and subsidiaries from any and all claims, offsets, defenses and counterclaims of any kind or nature, absolute and contingent, of which the undersigned are aware or should be aware, such waiver and release being with full knowledge and understanding of the circumstances and effect thereof and after having consulted legal counsel with respect thereto.

JURY TRIAL WAIVER. THE UNDERSIGNED, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG THE BORROWER, THE ADMINISTRATIVE AGENT, THE LENDERS AND THE UNDERSIGNED, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS GUARANTOR ACKNOWLEDGMENT AND AGREEMENT, THE AMENDMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY THE ABILITY OF THE ADMINISTRATIVE AGENT AND LENDERS TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT AMONG THE BORROWER, THE ADMINISTRATIVE AGENT, LENDERS AND THE UNDERSIGNED.

GENERAL ALUMINUM FORGINGS, LLC

T & W FORGE, LLC

QUALITY ALUMINUM FORGE, LLC

By: /s/ Salvatore Incanno

Salvatore Incanno

Treasurer

Signature Page to

Guarantor Acknowledgment and Agreement

SCHEDULE 1

COMMITMENTS OF LENDERS

LENDERS	REVOLVING CREDIT COMMITMENT PERCENTAGE	REVOLVING CREDIT COMMITMENT AMOUNT	TERM LOAN COMMITMENT PERCENTAGE	TERM LOAN COMMITMENT AMOUNT	MAXIMUM AMOUNT
KeyBank National Association	62.1474508300000%	$21,751,607.79	62.1474508300000%	$2,875,842.22	$24,627,450.01
Presidential Financial Corporation	37.8525491700000%	$13,248,392.21	37.8525491700000%	$1,751,607.79	$15,000,000.00
Total Commitment Amount	100%	$35,000,000	100%	$4,627,450.01	$39,627,450.01

S-1

EX-31.1

Exhibit 31.1

CERTIFICATION

OF THE CHIEF EXECUTIVE OFFICER

RULE 13A-14(A) / 15D-14(A)

I, Peter W. Knapper, certify that:

1. I have read this Quarterly Report on Form 10-Q of SIFCO Industries, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2017	/s/ Peter W. Knapper
	Peter W. Knapper
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

OF THE CHIEF FINANCIAL OFFICER

RULE 13A-14(A) / 15D-14(A)

I, Salvatore Incanno, certify that:

1. I have read this Quarterly Report on Form 10-Q of SIFCO Industries, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 5, 2017	/s/ Salvatore Incanno
	Salvatore Incanno
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of SIFCO Industries, Inc. (“Company”) on Form 10-Q for the quarter ended March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (“Report”), the undersigned officer of the Company certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 5, 2017	/s/ Peter W. Knapper
	Peter W. Knapper
	President and Chief Executive Officer

This certification accompanies this Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by SIFCO Industries, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that SIFCO Industries, Inc. specifically incorporates it by reference.

A signed original of this written statement required by Section 906 has been provided to SIFCO Industries, Inc. and will be retained by SIFCO Industries, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of SIFCO Industries, Inc. (“Company”) on Form 10-Q for the quarter ended March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (“Report”), the undersigned officer of the Company certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 5, 2017	/s/ Salvatore Incanno
	Salvatore Incanno
	Chief Financial Officer

This certification accompanies this Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by SIFCO Industries, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that SIFCO Industries, Inc. specifically incorporates it by reference.

A signed original of this written statement required by Section 906 has been provided to SIFCO Industries, Inc. and will be retained by SIFCO Industries, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information	6 Months Ended
	Mar. 31, 2017 shares
Document and Entity Information [Abstract]
Entity Registrant Name	SIFCO INDUSTRIES INC
Entity Central Index Key	0000090168
Current Fiscal Year End Date	--09-30
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding	5,598,716
Trading Symbol	SIF

XML

Consolidated Condensed Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Income Statement [Abstract]
Net sales	$ 31,302	$ 29,075	$ 62,776	$ 56,237
Cost of goods sold	27,643	25,513	54,948	50,566
Gross profit	3,659	3,562	7,828	5,671
Selling, general and administrative expenses	4,396	3,130	9,699	8,750
Amortization of intangible assets	573	613	1,165	1,328
(Gain) loss on disposal of operating assets	0	30	(6)	32
Operating loss	(1,310)	(211)	(3,030)	(4,439)
Interest income	(16)	(22)	(30)	(32)
Interest expense	541	436	1,219	845
Foreign currency exchange loss, net	12	20	17	34
Other income, net	(107)	(107)	(214)	(214)
Loss from operations before income tax expense (benefit)	(1,740)	(538)	(4,022)	(5,072)
Income tax expense (benefit)	(83)	(239)	244	(2,175)
Net loss	$ (1,657)	$ (299)	$ (4,266)	$ (2,897)
Net loss per share
Basic (in dollars per share)	$ (0.30)	$ (0.05)	$ (0.78)	$ (0.53)
Diluted (in dollars per share)	$ (0.30)	$ (0.05)	$ (0.78)	$ (0.53)
Weighted-average number of common shares (basic) (in shares)	5,479	5,464	5,473	5,458
Weighted-average number of common shares (diluted) (in shares)	5,479	5,464	5,473	5,458

XML

Consolidated Condensed Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Statement of Comprehensive Income [Abstract]
Net loss	$ (1,657)	$ (299)	$ (4,266)	$ (2,897)
Other comprehensive income (loss):
Foreign currency translation adjustment	245	762	(803)	315
Retirement plan liability adjustment, net of tax	214	210	448	403
Interest rate swap agreement adjustment, net of tax	13	0	29	0
Comprehensive income (loss)	$ (1,185)	$ 673	$ (4,592)	$ (2,179)

XML

Consolidated Condensed Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Current assets:
Cash and cash equivalents	$ 1,356	$ 471
Receivables, net of allowance for doubtful accounts of $423 and $706, respectively	26,190	25,158
Inventories, net	25,449	28,496
Refundable income taxes	1,825	1,773
Prepaid expenses and other current assets	2,207	2,177
Total current assets	57,027	58,075
Property, plant and equipment, net	45,878	48,958
Intangible assets, net	9,801	11,138
Goodwill	11,349	11,748
Other assets	281	538
Total assets	124,336	130,457
Current liabilities:
Current maturities of long-term debt	7,393	18,258
Revolving credit agreement	21,573	12,751
Accounts payable	15,418	14,520
Accrued liabilities	5,877	5,234
Total current liabilities	50,261	50,763
Long-term debt, net of current maturities	6,660	7,623
Deferred income taxes	2,836	2,929
Pension liability	8,010	8,341
Other long-term liabilities	465	431
Shareholders’ equity:
Serial preferred shares, no par value, authorized 1,000 shares	0	0
Common shares, par value $1 per share, authorized 10,000 shares; issued and outstanding shares – 5,599 at March 31, 2017 and 5,525 at September 30, 2016	5,599	5,525
Additional paid-in capital	9,470	9,219
Retained earnings	54,211	58,476
Accumulated other comprehensive loss	(13,176)	(12,850)
Total shareholders’ equity	56,104	60,370
Total liabilities and shareholders’ equity	$ 124,336	$ 130,457

XML

Consolidated Condensed Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 423	$ 706
Serial preferred shares, no par value
Serial preferred shares, shares authorized (in shares)	1,000,000	1,000,000
Common shares, par value (in dollars per share)	$ 1	$ 1
Common shares, shares authorized (in shares)	10,000,000	10,000,000
Common shares, shares issued (in shares)	5,599,000	5,525,000
Common shares, shares outstanding (in shares)	5,599,000	5,525,000

XML

Consolidated Condensed Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net loss	$ (4,266)	$ (2,897)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Depreciation and amortization	4,939	5,366
Amortization and write-off of debt issuance cost	328	72
(Gain) loss on disposal of operating assets	(6)	32
LIFO expense (benefit)	225	(8)
Share transactions under company stock plan	325	(642)
Purchase price inventory adjustment	0	266
Other long-term liabilities	202	160
Deferred income taxes	32	(642)
Changes in operating assets and liabilities:
Receivables	(1,245)	6,439
Inventories	2,581	(375)
Refundable taxes	(52)	(1,374)
Prepaid expenses and other current assets	322	(317)
Other assets	243	315
Accounts payable	881	4,809
Other accrued liabilities	597	722
Accrued income and other taxes	167	(163)
Net cash provided by operating activities of operations	5,273	11,763
Cash flows from investing activities:
Proceeds from disposal of operating assets	48	0
Capital expenditures	(964)	(1,176)
Net cash used for investing activities of operations	(916)	(1,176)
Cash flows from financing activities:
Payments on long term debt	(12,907)	(2,561)
Proceeds from revolving credit agreement	45,069	19,369
Repayments of revolving credit agreement	(36,247)	(27,536)
Payment of debt issue costs	(498)	0
Short-term debt borrowings	2,330	1,450
Short-term debt repayments	(1,218)	(1,047)
Net cash used for financing activities of operations	(3,471)	(10,325)
Increase in cash and cash equivalents	886	262
Cash and cash equivalents at the beginning of the period	471	667
Effect of exchange rate changes on cash and cash equivalents	(1)	23
Cash and cash equivalents at the end of the period	1,356	952
Supplemental disclosure of cash flow information of operations:
Cash paid for interest	(790)	(736)
Cash paid for income taxes, net	$ (55)	$ (185)

XML

Summary of Significant Accounting Policies

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

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.

The U.S. dollar is the functional currency for all of the Company’s U.S. operations and its Irish subsidiary. For these operations, all gains and losses from completed currency transactions are included in income currently. 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 2016 Annual Report on Form 10-K. The year-end consolidated condensed balance sheet data was derived from audited financial statements and disclosures required by accounting principles generally accepted accounting in the United States ("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 fiscal 2016 Annual Report on Form 10-K.

C. Net Loss per Share

The Company’s net loss per basic share has been computed based on the weighted-average number of common shares outstanding. Net loss per diluted share reflects the effect of the Company’s outstanding restricted shares and performance shares under the treasury stock method. The dilutive effect of the Company’s restricted shares and performance shares were as follows:

	Three Months Ended   March 31,						Six Months Ended   March 31,
	2017			2016			2017			2016
Net loss	$	(1,657	)	$	(299	)	$	(4,266	)	$	(2,897	)
Weighted-average common shares outstanding (basic)	5,479			5,464			5,473			5,458
Effect of dilutive securities:
Restricted shares (a)	—			—			—			—
Weighted-average common shares outstanding (diluted)	5,479			5,464			5,473			5,458
Net loss per share – basic:	$	(0.30	)	$	(0.05	)	(0.78		)	(0.53		)
Net loss per share – diluted:	$	(0.30	)	(0.05		)	$	(0.78	)	$	(0.53	)
Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share	120			17			90			15

(a) Due to a loss for the period, zero restricted shares are included because the effect would be anti-dilutive.

D. Derivative Financial Instruments

The Company entered an interest rate swap agreement on March 29, 2016 to reduce risk related to variable-rate debt, which was subject to changes in market rates of interest. The interest rate swap is designated as a cash flow hedge. The agreement was canceled as part of the debt modification on November 9, 2016, as further discussed in Note 4 - Debt. The Company accounted for the interest rate swap termination by recording the loss in accumulated other comprehensive loss as of December 31, 2016. The amount incurred in interest expense was nominal. As part of the new Credit Facility (described further in Note 4 - Debt, below) on November 9, 2016, the Company entered into a new interest rate swap on November 30, 2016 to reduce risk related to the variable debt over the life of the new term loan. At March 31, 2017, the Company held one interest rate swap agreement with a notional amount of $4,546. Cash flows related to the interest rate swap agreement are included in interest expense. The Company’s interest rate swap agreement and its variable-rate term debt were based upon LIBOR. At March 31, 2017 and September 30, 2016, the Company’s interest rate swap agreement qualified as a fully effective cash flow hedge against the Company’s variable-rate term note. The mark-to-market valuation was a $2 and $30 liability at March 31, 2017 and September 30, 2016, respectively.

E. Impact of Recently Issued Accounting Standards

In May 2014, and as subsequently updated (Accounting Standard Update ("ASU") 2016-20 being most recent), the Financial Accounting Standards Board ("FASB") issued new accounting guidance that creates a single revenue recognition model, while clarifying the principles for recognizing revenue. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods. The Company will adopt the new guidance on October 1, 2018. The Company has started a bottoms up approach to analyze the standard's impact on its revenues by looking at historical policies and practices and identifying the differences from applying the new standard to its revenue streams. The Company has not determined the effect of the standard to its consolidated condensed financial statements.

In March 2016, the FASB issued ASU 2016-09, which makes a number of changes meant to simplify and improve accounting for shared-based payments. The ASU will be effective for the Company for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has considered the potential implications of adoption of the ASU and due to the valuation allowance recorded at September 30, 2016 in the U.S., the Company does not expect a material impact from a tax perspective. The Company is still evaluating other non-tax components it may have on its consolidated condensed financial statements.

In October 2016, the FASB issued ASU 2016-16, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory. This ASU will be effective for the Company for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact it may have on its consolidated condensed financial statements, together with evaluating the adoption date.

In November 2016, the FASB issued ASU 2016-18 requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash would be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods. Early adoption is permitted. The Company is currently evaluating its plans regarding the adoption, but does not feel that this ASU is expected to have a material impact to the consolidated condensed statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations, which clarified existing guidance on the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Early adoption is permitted and the guidance is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2017 with early adoption permitted as of the beginning of the annual reporting period in which the ASU was issued. The Company is currently evaluating the potential impact on its consolidated condensed financial statements.

In March 2017, the FASB issued ASU 2017-07, which relates to pension related costs that require an entity to report the following service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs. The other components of the net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside of any subtotal of operating income. Additionally, only the service cost component will be eligible for capitalization in assets. The ASU is effective for October 1, 2018, early adoption is permitted and the ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost in the income statement and prospectively for the capitalization of the service cost component. The amendment allows for a practical expedient that permits an employer to use the amounts disclosed in its pension and other post-retirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. The Company will need to disclose that the practical expedient was used. The Company is currently evaluating the impact it may have on its consolidated condensed financial statements, together with evaluating the adoption date.

F. Recently Adopted Accounting Standards

In January 2017, the FASB issued ASU 2017-04, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The Company performs Step 1 of the annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. If the carrying amount exceeds the fair value, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the fair value, not to exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This ASU must be applied prospectively and is effective for any annual and interim goodwill impairment test in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company has elected to early adopt.

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Inventories

6 Months Ended

Mar. 31, 2017

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories consist of:

	March 31,   2017		September 30,   2016
Raw materials and supplies	$	5,721	$	7,724
Work-in-process	10,122		10,459
Finished goods	9,606		10,313
Total inventories	$	25,449	$	28,496

Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (“LIFO”) method for 35% and 44% of the Company’s inventories at March 31, 2017 and September 30, 2016, respectively. The first-in, first-out (“FIFO”) method is used for the remainder of the inventories. If the FIFO method had been used for the inventories for which cost is determined using the LIFO method, inventories would have been $8,252 and $8,026 higher than reported at March 31, 2017 and September 30, 2016, respectively.

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Accumulated Other Comprehensive Loss

6 Months Ended

Mar. 31, 2017

Equity [Abstract]

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follows:

	March 31,   2017			September 30,   2016
Foreign currency translation adjustment	$	(6,426	)	$	(5,623	)
Retirement plan liability adjustment, net of tax	(6,748		)	(7,197		)
Interest rate swap agreement adjustment, net of tax	(2		)	(30		)
Total accumulated other comprehensive loss	$	(13,176	)	$	(12,850	)

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Debt

6 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Debt

Debt

Debt consists of:

	March 31,   2017			September 30,   2016
Revolving credit agreement	$	21,573		$	12,751
Foreign subsidiary borrowings	9,168			9,540
Capital lease obligations	394			153
Term loan	4,546			16,429
Less: unamortized debt issuance cost	(55		)	(241		)
Term loan less unamortized debt issuance cost	4,491			16,188
Total Debt	35,626			38,632
Less – current maturities	(28,966		)	(31,009		)
Total long-term debt	$	6,660		$	7,623

On November 9, 2016, the Company entered into an Amended and Restated Credit and Security Agreement ("Credit Facility") with its Lender. The Credit Facility matures on June 25, 2020 and consists of secured loans in an aggregate principal amount of up to $39,871. The Credit Facility is comprised of (i) a senior secured revolving credit facility of a maximum borrowing amount of $35,000, including swing line loans and letters of credit provided by the Lender and (ii) senior secured term loan facility in the amount of $4,871 (the "Term Facility"). The new Term Facility is repayable in monthly installments of $81 beginning December 1, 2016. The terms of the Credit Facility contain both a lockbox arrangement and subjective acceleration clause. As a result, the amounts outstanding on the revolving credit facility are classified as a short-term liability. The amounts borrowed under the Amended and Restated Agreement were used to repay the amounts outstanding under the Company's previous Credit Agreement, for working capital, for general corporate purposes and to pay fees and expenses associated with this transaction. In connection with entering into the Credit Facility, the Company terminated its interest rate swap agreement with the Lender, as referenced in Note 1 - D. Derivative Financial Instruments. The Company entered into its First Amendment Agreement ("First Amendment") to the Credit Facility on February 16, 2017. The First Amendment assigned its Lender as Administrative Agent and assigned a portion of its Credit Facility to participating Lender.

Borrowings will bear interest at the LIBOR rate, prime rate, or the eurocurrency reference rate depending on the type of loan requested by the Company, in each case, plus the applicable margin as set forth in the Amended and Restated Agreement. The revolver has a rate based on LIBOR plus a 3.75% spread and a prime rate, which resulted in a weighted average rate of 4.7% at March 31, 2017 and the term loan has a rate of 5.1% at March 31, 2017, which was based on LIBOR plus a 4.25% spread. This rate becomes an effective fixed rate of 5.8% after giving effect to the interest rate swap agreement. There is also a commitment fee ranging from 0.15% to 0.375% to be incurred on the unused balance.

Under the Company's Credit Facility, the Company is subject to certain customary loan covenants. These include, without limitation, covenants that require maintenance of certain specified financial ratios, including that the Company meeting a minimum EBITDA and maintain a minimum fixed charge coverage ratio (to start on September 30, 2017). The Company was in compliance with its loan covenants as of March 31, 2017.

On June 26, 2015, the Company entered a Credit and Security Agreement (the "2015 Credit Agreement") with its Lender. The credit facility was comprised of (i) a five-year revolving credit facility with a maximum borrowing amount of up to $25,000, which reduced to $20,000 on January 1, 2016, and (ii) a five-year term loan of $20,000.  Amounts borrowed under the credit facility were secured by substantially all the assets of the Company and its U.S. subsidiaries and a pledge of 65% of the stock of its non-U.S. subsidiaries. The term loan was repayable in quarterly installments of $714 starting September 30, 2015. The amounts borrowed under the 2015 Credit Agreement were used to repay the Company's previous revolver and term note, to fund the acquisition of the Maniago, Italy location and for working capital and general corporate purposes. The 2015 Credit Agreement also had an accordion feature, which allowed the Company to increase the availability by up to $15,000 upon consent of the existing lenders or upon additional lenders being joined to the facility. Borrowings bore interest at the LIBOR rate, prime rate, or the eurocurrency reference rate depending on the type of loan requested by the Company, in each case, plus the applicable margin as set forth in the Credit Agreement.

Foreign subsidiary borrowings

As of March 31, 2017 and September 30, 2016, the total foreign debt borrowings (excluding capital leases) were $9,168 and $9,540, respectively, of which $6,322 and $5,833, respectively is the current portion. Current debt as of March 31, 2017 and September 30, 2016, consist of $4,043 and $3,262 of short-term borrowings, $1,575 and $2,014 is the current portion of long-term debt, and $704 and $557 of factoring. Interest rates on the term note are based on Euribor rates which range from 1.0% to 4.0%. The factoring programs are uncommitted, whereby the Company offers receivables for sale to an unaffiliated financial institution, which are then subject to acceptance by the unaffiliated financial institution. Following the sale and transfer of the receivables to the unaffiliated financial institution, the receivables are not isolated from the Company, and effective control of the receivables is not passed to the unaffiliated financial institution, which does not have the right to pledge or sell the receivables. 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 sheet. There was $704 and $557 of short-term borrowings relating to this agreement at March 31, 2017 and September 30, 2016, respectively, classified within short-term debt. The carrying value of the receivables pledged as collateral were $1,131 and $1,156 at March 31, 2017 and September 30, 2016.

Future payment schedule

Payments on long-term debt under the Credit Facility and foreign subsidiary borrowings (excluding capital lease obligations, see below) for the remainder of this fiscal year and each of the four succeeding fiscal years are as follows:

	Minimum long-term debt payments
2017 (April 1 to September 30, 2017)	$	1,407
2018	2,188
2019	2,079
2020	3,054
2021	240
Total Minimum long-term debt payments	$	8,968

Debt issuance costs

The Company incurred debt issuance costs in connection with its 2015 Credit Agreement in the amount of $724. However, with the Credit Facility, the Company incurred an additional $498 of costs in November 2016 and wrote off $241 of debt issuance costs as of December 31, 2016 due to debt modification accounting for deferred financing costs as it relates to the term note, which is included in interest expense in the accompanying consolidated condensed financial statements. Total debt issuance cost in the amount of $786 is split between the Term facility and the revolving credit facility. The portion noted above within debt table relates to the Term facility in the amount of $61, net of amortization of $6 at March 31, 2017. The remaining $725 of debt issuance cost relates to the revolving credit facility. This portion is shown in the consolidated condensed balance sheet as a deferred charge in other current assets, which was reclassed from other long-term assets due to the classification of the revolving credit facility noted above, net of amortization of $181 at March 31, 2017.

Capital leases

The Company entered into new capital leases for equipment in the first quarter of fiscal 2017 . The minimum rental commitments under non-cancelable leases are for the remainder of this fiscal year and each of the succeeding fiscal years are as follows:

	Capital Leases
2017 (April 1 to September 30, 2017)	$	58
2018	118
2019	110
2020	66
2021	66
Thereafter	15
Total minimum lease payments	$	433
Less: Amount representing interest	$	(39	)
Present value of minimum lease payments	$	394

Amortization of the cost of equipment under capital leases is included in depreciation expense. Assets recorded under capital leases consist of the following:

	March 31,   2017			September 30,   2016
Machinery and equipment	$	525		$	250
Accumulated depreciation	(98		)	(60		)

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Income Taxes

6 Months Ended

Mar. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

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 continuing 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 2017 was (6)%, compared with 43% for the same period of fiscal 2016. This decrease is primarily attributable to year-to-date U.S. loss with no tax benefit due to a valuation allowance in fiscal 2017. Additionally, in fiscal 2016, the effective tax rate was higher in comparison to fiscal 2017 driven by discrete tax benefits of $461 primarily related to tax legislation enacted during the first quarter of fiscal 2016, applied against a year-to-date loss. 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 that 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. The Company believes it has appropriate support for its federal income tax returns.

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Retirement Benefit Plans

6 Months Ended

Mar. 31, 2017

Compensation and Retirement Disclosure [Abstract]

Retirement Benefit Plans

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,
	2017			2016			2017			2016
Service cost	$	78		$	69		$	157		$	139
Interest cost	220			256			440			512
Expected return on plan assets	(404		)	(407		)	(809		)	(815		)
Amortization of net loss	214			210			429			420
Net periodic cost	$	108		$	128		$	217		$	256

During the six months ended March 31, 2017 and 2016, the Company made no contributions to its defined benefit pension plans. The Company has carryover balances from previous periods that may be available for use as a credit to reduce the amount of contributions that the Company is required to make to certain defined benefit plans in fiscal 2017. 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 in making additional cash contributions to fund its defined benefit pension plans during the balance of fiscal 2017.

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Stock-Based Compensation

6 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

The Company, with the approval of its shareholders on January 25, 2017, amended and restated its 2007 Long-Term Incentive Plan ("2007 Plan") to the 2016 Long-Term Incentive Plan ("2016 Plan"). The amendment increased the aggregate number of shares that may be awarded under the 2016 Plan to 646 less any shares previously awarded and subject to an adjustment for the forfeiture of any unvested shares. In addition, shares that may be awarded are subject to individual recipient award limitations. The shares awarded under the 2016 Plan may be made in multiple forms, including stock options, stock appreciation rights, restricted or unrestricted stock, and performance related shares. Any such award is exercisable no later than ten years from the date of the grant.

The performance shares that have been awarded under both plans generally provide for the vesting of the Company’s common shares upon the Company achieving certain defined financial performance objectives during a period up to three years following the making of such award. The ultimate number of common shares of the Company that may be earned pursuant to an award ranges from a minimum of no shares to a maximum of 150% of the initial target number of performance shares awarded, depending on the level of the Company’s achievement of its financial performance objectives.

With respect to such performance shares, compensation expense is being accrued. During each future reporting period, such expense may be subject to adjustment based upon the Company's financial performance, which impacts the number of common shares that it expects to vest upon the completion of the performance period. The performance shares were valued at the closing market price of the Company’s common shares on the date of the grant. The vesting of such shares is determined at the end of the performance period.

During the first six months of fiscal 2017, one award for 5 performance shares under the 2007 Plan vested, of which 2 performance shares were tendered back to the Company to cover payroll costs. For the fiscal 2017 award, the Company granted 107 shares under the 2007 Plan to certain key employees. The award was split into two tranches, 69 performance shares and 38 shares of time-based restricted shares, with a grant date fair value of $7.45. The award vests over three years.

The Company has awarded restricted shares to its directors, officers, and other employees of the Company. The restricted shares were valued at the closing market price of the Company’s common shares on the date of the grant, and such value was recorded as unearned compensation. The unearned compensation is being amortized ratably over the restricted stock vesting period of one year or three years.

During the first six months of fiscal 2017, the company granted its non-employee directors 33 restricted shares under the 2016 Plan, with a grant date fair value of $8.05, which vest over one year. One award for 29 restricted shares vested.

If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately 363 shares that remain available for award at March 31, 2017. 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 under the 2007 Plan was $345 expense and $464 benefit during the first six months of fiscal 2017 and 2016, respectively and expense of $187 for the second quarter of fiscal 2017 and a benefit of $810 for the second quarter of fiscal 2016. As of March 31, 2017, there was $1,315 of total unrecognized compensation cost related to the performance shares and restricted shares awarded under the 2007 Plan. The Company expects to recognize this cost over the next 2.0 years.

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Commitments and Contingencies

6 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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 believe any such matters are material to its financial condition or results of operations. 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.

The Company is currently a defendant in a class action lawsuit filed in the Superior Court of California, County of Orange, alleging violations of California wage-and-hour laws, rules and regulations pertaining primarily to failure to accurately calculate and pay hourly and overtime wages; failure to provide meal periods; failure to authorize and permit rest periods; failure to indemnify necessary expenditures; failure to timely pay wages; and unfair competition. Although the Company records reserves for legal disputes and other matters in accordance with generally accepted accounting principles in the United States of America, ("GAAP"), the ultimate outcomes of these types of matters are inherently uncertain. Actual results may differ significantly from current estimates. Given the current status of this matter, Company has not concluded that a loss is probable, as such an estimate of a loss has not been recorded.

The Company's Cleveland, Ohio location had an Occupational Safety and Health Administration ("OSHA") inspection at the facility on September 1, 2016. This inspection resulted in OSHA issuing citations to the location. Since the inspection, SIFCO has abated or is in the process of abating all issues identified. These findings resulted in penalties to be assessed in the amount of $127 as of March 31, 2017.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Principles of Consolidation

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.

The U.S. dollar is the functional currency for all of the Company’s U.S. operations and its Irish subsidiary. For these operations, all gains and losses from completed currency transactions are included in income currently. 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 2016 Annual Report on Form 10-K. The year-end consolidated condensed balance sheet data was derived from audited financial statements and disclosures required by accounting principles generally accepted accounting in the United States ("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.

Net Loss per Share

Net Loss per Share

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

Derivative Financial Instruments

Derivative Financial Instruments

The Company entered an interest rate swap agreement on March 29, 2016 to reduce risk related to variable-rate debt, which was subject to changes in market rates of interest. The interest rate swap is designated as a cash flow hedge.

Impact of Recently Issued Accounting Standards and Recently Adopted Accounting Standards

Impact of Recently Issued Accounting Standards

In May 2014, and as subsequently updated (Accounting Standard Update ("ASU") 2016-20 being most recent), the Financial Accounting Standards Board ("FASB") issued new accounting guidance that creates a single revenue recognition model, while clarifying the principles for recognizing revenue. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods. The Company will adopt the new guidance on October 1, 2018. The Company has started a bottoms up approach to analyze the standard's impact on its revenues by looking at historical policies and practices and identifying the differences from applying the new standard to its revenue streams. The Company has not determined the effect of the standard to its consolidated condensed financial statements.

In March 2016, the FASB issued ASU 2016-09, which makes a number of changes meant to simplify and improve accounting for shared-based payments. The ASU will be effective for the Company for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has considered the potential implications of adoption of the ASU and due to the valuation allowance recorded at September 30, 2016 in the U.S., the Company does not expect a material impact from a tax perspective. The Company is still evaluating other non-tax components it may have on its consolidated condensed financial statements.

In October 2016, the FASB issued ASU 2016-16, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory. This ASU will be effective for the Company for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact it may have on its consolidated condensed financial statements, together with evaluating the adoption date.

In November 2016, the FASB issued ASU 2016-18 requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash would be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods. Early adoption is permitted. The Company is currently evaluating its plans regarding the adoption, but does not feel that this ASU is expected to have a material impact to the consolidated condensed statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations, which clarified existing guidance on the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Early adoption is permitted and the guidance is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2017 with early adoption permitted as of the beginning of the annual reporting period in which the ASU was issued. The Company is currently evaluating the potential impact on its consolidated condensed financial statements.

In March 2017, the FASB issued ASU 2017-07, which relates to pension related costs that require an entity to report the following service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs. The other components of the net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside of any subtotal of operating income. Additionally, only the service cost component will be eligible for capitalization in assets. The ASU is effective for October 1, 2018, early adoption is permitted and the ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost in the income statement and prospectively for the capitalization of the service cost component. The amendment allows for a practical expedient that permits an employer to use the amounts disclosed in its pension and other post-retirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. The Company will need to disclose that the practical expedient was used. The Company is currently evaluating the impact it may have on its consolidated condensed financial statements, together with evaluating the adoption date.

F. Recently Adopted Accounting Standards

In January 2017, the FASB issued ASU 2017-04, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The Company performs Step 1 of the annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. If the carrying amount exceeds the fair value, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the fair value, not to exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This ASU must be applied prospectively and is effective for any annual and interim goodwill impairment test in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company has elected to early adopt.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Schedule of dilutive effect of company's restricted shares and performance shares

The dilutive effect of the Company’s restricted shares and performance shares were as follows:

	Three Months Ended   March 31,						Six Months Ended   March 31,
	2017			2016			2017			2016
Net loss	$	(1,657	)	$	(299	)	$	(4,266	)	$	(2,897	)
Weighted-average common shares outstanding (basic)	5,479			5,464			5,473			5,458
Effect of dilutive securities:
Restricted shares (a)	—			—			—			—
Weighted-average common shares outstanding (diluted)	5,479			5,464			5,473			5,458
Net loss per share – basic:	$	(0.30	)	$	(0.05	)	(0.78		)	(0.53		)
Net loss per share – diluted:	$	(0.30	)	(0.05		)	$	(0.78	)	$	(0.53	)
Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share	120			17			90			15

(a) Due to a loss for the period, zero restricted shares are included because the effect would be anti-dilutive.

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Inventories (Tables)

6 Months Ended

Mar. 31, 2017

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consist of:

	March 31,   2017		September 30,   2016
Raw materials and supplies	$	5,721	$	7,724
Work-in-process	10,122		10,459
Finished goods	9,606		10,313
Total inventories	$	25,449	$	28,496

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Mar. 31, 2017

Equity [Abstract]

Components of Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follows:

	March 31,   2017			September 30,   2016
Foreign currency translation adjustment	$	(6,426	)	$	(5,623	)
Retirement plan liability adjustment, net of tax	(6,748		)	(7,197		)
Interest rate swap agreement adjustment, net of tax	(2		)	(30		)
Total accumulated other comprehensive loss	$	(13,176	)	$	(12,850	)

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Debt (Tables)

6 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Schedule of Debt

Debt consists of:

	March 31,   2017			September 30,   2016
Revolving credit agreement	$	21,573		$	12,751
Foreign subsidiary borrowings	9,168			9,540
Capital lease obligations	394			153
Term loan	4,546			16,429
Less: unamortized debt issuance cost	(55		)	(241		)
Term loan less unamortized debt issuance cost	4,491			16,188
Total Debt	35,626			38,632
Less – current maturities	(28,966		)	(31,009		)
Total long-term debt	$	6,660		$	7,623

Schedule of Payments of Long-term Debt

Payments on long-term debt under the Credit Facility and foreign subsidiary borrowings (excluding capital lease obligations, see below) for the remainder of this fiscal year and each of the four succeeding fiscal years are as follows:

	Minimum long-term debt payments
2017 (April 1 to September 30, 2017)	$	1,407
2018	2,188
2019	2,079
2020	3,054
2021	240
Total Minimum long-term debt payments	$	8,968

Schedule of Minimum Rental Commitments Under Non-Cancelable Capital Leases

The minimum rental commitments under non-cancelable leases are for the remainder of this fiscal year and each of the succeeding fiscal years are as follows:

	Capital Leases
2017 (April 1 to September 30, 2017)	$	58
2018	118
2019	110
2020	66
2021	66
Thereafter	15
Total minimum lease payments	$	433
Less: Amount representing interest	$	(39	)
Present value of minimum lease payments	$	394

Schedule of Assets Under Capital Leases

Assets recorded under capital leases consist of the following:

	March 31,   2017			September 30,   2016
Machinery and equipment	$	525		$	250
Accumulated depreciation	(98		)	(60		)

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Retirement Benefit Plans (Tables)

6 Months Ended

Mar. 31, 2017

Compensation and Retirement Disclosure [Abstract]

Schedule of Components of Net Periodic Benefit Cost

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,
	2017			2016			2017			2016
Service cost	$	78		$	69		$	157		$	139
Interest cost	220			256			440			512
Expected return on plan assets	(404		)	(407		)	(809		)	(815		)
Amortization of net loss	214			210			429			420
Net periodic cost	$	108		$	128		$	217		$	256

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Summary of Significant Accounting Policies - Dilutive Effect of the Company's Restricted Shares and Performance Shares (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Schedule Of Earnings Per Share Basic And Diluted [Line Items]
Net loss	$ (1,657)	$ (299)	$ (4,266)	$ (2,897)
Weighted-average common shares outstanding (basic) (in shares)	5,479,000	5,464,000	5,473,000	5,458,000
Effect of dilutive securities:
Weighted-average common shares outstanding (diluted) (in shares)	5,479,000	5,464,000	5,473,000	5,458,000
Net loss per share - basic (in dollars per share)	$ (0.30)	$ (0.05)	$ (0.78)	$ (0.53)
Net loss per share - diluted (in dollars per share)	$ (0.30)	$ (0.05)	$ (0.78)	$ (0.53)
Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share (in shares)	120,000	17,000	90,000	15,000
Restricted Stock
Effect of dilutive securities:
Effect of diluted securities (in shares)	0	0	0	0
Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share (in shares)			0

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Summary of Significant Accounting Policies - Derivative Financial Instruments (Details) - Interest Rate Swap $ in Thousands	Mar. 31, 2017 USD ($) instrument	Sep. 30, 2016 USD ($)
Derivative [Line Items]
Number of interest rate swaps | instrument	1
Cash Flow Hedging
Derivative [Line Items]
Interest rate swap notional amount	$ 4,546
Interest rate swap fair value, liability	$ 2	$ 30

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Inventories - Schedule of Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Inventory Disclosure [Abstract]
Raw materials and supplies	$ 5,721	$ 7,724
Work-in-process	10,122	10,459
Finished goods	9,606	10,313
Total inventories	$ 25,449	$ 28,496

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Inventories - Additional Information (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Inventory Disclosure [Abstract]
Percentage of inventories determined using LIFO method	35.00%	44.00%
Additional amount that would have been reported in inventory if FIFO method had been used	$ 8,252	$ 8,026

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Accumulated Other Comprehensive Loss - Components of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total shareholders' equity	$ 56,104	$ 60,370
Foreign currency translation adjustment
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total shareholders' equity	(6,426)	(5,623)
Retirement plan liability adjustment, net of tax
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total shareholders' equity	(6,748)	(7,197)
Interest rate swap agreement adjustment, net of tax
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total shareholders' equity	(2)	(30)
Total accumulated other comprehensive loss
Accumulated Other Comprehensive Income (Loss) [Line Items]
Total shareholders' equity	$ (13,176)	$ (12,850)

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Debt - Schedule of Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Debt Instrument [Line Items]
Total debt	$ 35,626	$ 38,632
Less – current maturities	(28,966)	(31,009)
Total long-term debt	6,660	7,623
Capital Lease Obligations
Debt Instrument [Line Items]
Total debt	394	153
Term Loan
Debt Instrument [Line Items]
Total debt	4,491	16,188
Long-term debt, gross	4,546	16,429
Less: unamortized debt issuance cost	(55)	(241)
Foreign Subsidiary Borrowings
Debt Instrument [Line Items]
Total debt	9,168	9,540
Less – current maturities	(6,322)	(5,833)
Line of Credit
Debt Instrument [Line Items]
Total debt	$ 21,573	$ 12,751

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Debt - Additional Information (Details) - USD ($)			3 Months Ended	6 Months Ended
	Nov. 09, 2016	Jun. 26, 2015	Dec. 31, 2016	Mar. 31, 2017	Nov. 30, 2016	Sep. 30, 2016	Jan. 01, 2016
Line of Credit Facility [Line Items]
Outstanding borrowings				$ 8,968,000
Foreign debt borrowings, current				28,966,000		$ 31,009,000
Revolving credit agreement				21,573,000		12,751,000
Foreign debt borrowings, long-term debt, current portion				7,393,000		18,258,000
Foreign Subsidiary Borrowings
Line of Credit Facility [Line Items]
Outstanding borrowings				9,168,000		9,540,000
Foreign debt borrowings, current				6,322,000		5,833,000
Revolving credit agreement				4,043,000		3,262,000
Foreign debt borrowings, long-term debt, current portion				1,575,000		2,014,000
Foreign debt borrowings, factoring payable, current				704,000		557,000
Receivables pledged as collateral, carrying value				$ 1,131,000		$ 1,156,000
Foreign Subsidiary Borrowings | Euro Interbank Offered Rate (Euribor) | Minimum
Line of Credit Facility [Line Items]
Euribor variable interest rates				1.00%
Foreign Subsidiary Borrowings | Euro Interbank Offered Rate (Euribor) | Maximum
Line of Credit Facility [Line Items]
Euribor variable interest rates				4.00%
Credit Facility
Line of Credit Facility [Line Items]
Revolving credit facility, maximum borrowing capacity	$ 39,871
Debt issuance costs incurred					$ 498,000
Debt issuance costs related to the term loan and revolving credit facility, gross				$ 786,000
Credit Facility | Term Loan
Line of Credit Facility [Line Items]
Issued amount of debt	4,871,000
Installment payment	$ 81,000
Weighted average interest rate, term loan				5.10%
Fixed interest rate after effect of interest rate swap	5.80%
Debt issuance costs incurred				$ 61,000
Accumulated amortization of debt issuance costs				$ 6,000
Credit Facility | Term Loan | London Interbank Offered Rate (LIBOR)
Line of Credit Facility [Line Items]
Basis spread on LIBOR				4.25%
Credit Facility | Line of Credit
Line of Credit Facility [Line Items]
Revolving credit facility, maximum borrowing capacity	$ 35,000,000
Weighted average interest rate, revolving credit facility				4.70%
Revolving line of credit, debt Issuance costs incurred, gross				$ 725,000
Revolving line of credit, accumulated amortization of debt issuance costs				$ 181,000
Credit Facility | Line of Credit | Minimum
Line of Credit Facility [Line Items]
Commitment fee percentage	0.15%
Credit Facility | Line of Credit | Maximum
Line of Credit Facility [Line Items]
Commitment fee percentage	0.375%
Credit Facility | Line of Credit | London Interbank Offered Rate (LIBOR)
Line of Credit Facility [Line Items]
Basis spread on LIBOR	3.75%
2015 Credit Agreement
Line of Credit Facility [Line Items]
Debt issuance costs incurred		$ 724,000
Write off of deferred debt issuance cost due to debt modification			$ 241,000
2015 Credit Agreement | Revolving Credit Facility
Line of Credit Facility [Line Items]
Revolving credit facility, maximum borrowing capacity		$ 25,000,000					$ 20,000,000
Debt agreement term		5 years
Percentage of stock of non-U.S. subsidiaries pledged		65.00%
Accordion feature, amount of increase in borrowing capacity		$ 15,000,000
2015 Credit Agreement | Term Loan
Line of Credit Facility [Line Items]
Issued amount of debt		20,000,000
Installment payment		$ 714,000
Debt agreement term		5 years

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Debt - Schedule of Payments of Long-term Debt (Details) $ in Thousands	Mar. 31, 2017 USD ($)
Maturities of Long-term Debt [Abstract]
2017 (April 1 to September 30, 2017)	$ 1,407
2018	2,188
2019	2,079
2020	3,054
2021	240
Total minimum long-term debt payments	$ 8,968

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Debt - Schedule of Minimum Rental Commitments Under Non-Cancelable Capital Leases (Details) $ in Thousands	Mar. 31, 2017 USD ($)
Capital Leases, Future Minimum Payments, Net Present Value [Abstract]
2017 (April 1 to September 30, 2017)	$ 58
2018	118
2019	110
2020	66
2021	66
Thereafter	15
Total minimum lease payments	433
Less: Amount representing interest	(39)
Present value of minimum lease payments	$ 394

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Debt - Schedule of Assets Under Capital Leases (Details) - Machinery and Equipment - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Capital Leased Assets [Line Items]
Capital lease assets, gross	$ 525	$ 250
Capital lease assets, accumulated depreciation	$ (98)	$ (60)

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Income Taxes - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Dec. 31, 2015	Mar. 31, 2017	Mar. 31, 2016
Income Tax Disclosure [Abstract]
Effective tax rate, percent		(6.00%)	43.00%
Income tax expense (benefit)	$ 461

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Retirement Benefit Plans - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Compensation and Retirement Disclosure [Abstract]
Service cost	$ 78	$ 69	$ 157	$ 139
Interest cost	220	256	440	512
Expected return on plan assets	(404)	(407)	(809)	(815)
Amortization of net loss	214	210	429	420
Net periodic cost	$ 108	$ 128	$ 217	$ 256

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Retirement Benefit Plans - Additional Information (Details) - USD ($)	6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Compensation and Retirement Disclosure [Abstract]
Contributions amount in defined benefit pension plans	$ 0	$ 0

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Stock-Based Compensation - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Schedule Of Earnings Per Share Basic And Diluted [Line Items]
Outstanding share awards earned and issued at greater than the target number of shares			150.00%
Restricted Stock | Minimum
Schedule Of Earnings Per Share Basic And Diluted [Line Items]
Vesting period (in years)			1 year
Restricted Stock | Maximum
Schedule Of Earnings Per Share Basic And Diluted [Line Items]
Vesting period (in years)			3 years
2007 Plan
Schedule Of Earnings Per Share Basic And Diluted [Line Items]
Aggregate number of shares that may be awarded (in shares)	646,000		646,000
Vesting period (in years)			10 years
Outstanding share awards that may be awarded (in shares)	363,000		363,000
Share-based compensation expense (benefit)	$ 187	$ (810)	$ 345	$ (464)
Total unrecognized compensation cost related to performance and restricted shares	$ 1,315		$ 1,315
Period of recognized compensation cost (in years)			2 years
2007 Plan | Performance shares
Schedule Of Earnings Per Share Basic And Diluted [Line Items]
Performance period (in years)			3 years
Shares vested in period (in shares)			5,000
Performance shares paid for payroll costs (in shares)			2,000
Shares granted in period (in shares)			69,000
2007 Plan | Performance shares | Minimum
Schedule Of Earnings Per Share Basic And Diluted [Line Items]
Common shares earned pursuant to award (in shares)			0
2007 Plan | Performance shares | Maximum
Schedule Of Earnings Per Share Basic And Diluted [Line Items]
Common shares earned as percentage of initial target number shares awarded			150.00%
2007 Plan | Restricted Stock
Schedule Of Earnings Per Share Basic And Diluted [Line Items]
Shares granted in period (in shares)			38,000
2007 Plan | Restricted Stock | Non-Employee Directors
Schedule Of Earnings Per Share Basic And Diluted [Line Items]
Vesting period (in years)			1 year
Shares vested in period (in shares)			29,000
Shares granted in period (in shares)			33,000
Shares granted in period, grant date fair value (in dollars per share)			$ 8.05
2007 Plan | Performance and Restricted Shares
Schedule Of Earnings Per Share Basic And Diluted [Line Items]
Vesting period (in years)			3 years
Shares granted in period (in shares)			107,000
Shares granted in period, grant date fair value (in dollars per share)			$ 7.45

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Commitments and Contingencies - Additional Information (Details) $ in Thousands	Mar. 31, 2017 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Penalty assessed	$ 127