Commitments and Contingencies

12 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

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.

A subsidiary of the Company, Quality Aluminum Forge, LLC ("Orange"), is currently a defendant in a lawsuit filed by Avco Corporation (“Avco”) in the Pennsylvania State Court, which was filed in August 2019, alleging that certain forged pistons delivered by the Orange plant failed to meet material specifications required by Avco. Avco also sued Arconic, Inc. (“Arconic”), which was the raw material supplier. No specific amount of damages was claimed by Avco and discovery has only recently begun. Orange disagrees with the allegations made by Avco and has made cross claims against Arconic. Previously, Orange was a defendant with respect to the same action in the United States District Court for the District of Rhode Island, which action was dismissed in connection with the movement of the matter to Pennsylvania State Court. Although the Company records reserves for legal disputes and other matters in accordance with 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, the Company has not recorded a charge, as the Company does not have a reasonable basis on which to establish an estimate.

The Company is a defendant in a purported class action lawsuit filed in the Superior Court of California, County of Orange, which was filed in August 2017, arising from employee wage-and-hour claims under California law for alleged meal period, rest break, hourly and overtime wage calculation, timely wage payment and necessary expenditure indemnification violations; failure to maintain required wage records and furnish accurate wage statements; and unfair competition. A settlement has been reached and the Company received preliminary court approval on July 13, 2020, following a brief delay caused by COVID-19 closures and restrictions. Class action notices were sent at the end of September. The Company recorded an additional $65 in fiscal 2020 as part of the estimated loss and had previously recorded an estimated loss of $250 as of September 30, 2019.

During fiscal 2020, the Company received notice from the International Association of Machinists and Aerospace Workers Union that they were disclaiming all interest in representing certain hourly employees at the Company’s Cleveland facility. Subsequently, the International Brotherhood of Boilermakers Union filed a petition to represent this same group of hourly employees. A mail ballot election took place in June and the National Labor Relations Board certified the International Brotherhood of Boilermakers as the elected representative of the Company’s hourly production employees. The Company’s obligations will be more fully understood following the ratification of a collective bargaining agreement.

In fiscal 2020, the Company continued to make significant progress in its restoration of its operations at the manufacturing facility at the Company's Orange location, which was damaged by a fire that occurred in fiscal 2019. As part of these efforts, the Company continued to actively work with its insurance carrier to obtain insurance proceeds in order to restore its Orange location to full service as safely and quickly as possible, following the fire. The Company relocated a press to Orange from a temporary Michigan location in November 2019, which was placed into service in March 2020, and two other presses were brought into service at the Orange location, one in December 2019 and the second at the end of July 2020. Restoration of the building structure is nearly complete. As of the September 30, 2020, Orange had six out of eight presses in production. Two of

the six presses damaged in the fire are still in the restoration process. The Company anticipates to have those restored within the first half of fiscal 2021; however, no assurances can be made that the restoration will be completed within such timeframe.

As of September 30, 2020, the Company recognized insurance proceeds of $8,974, of which $7,427 out of the $10,927 received pertains to fiscal 2020. As of September 30, 2019, the Company recognized insurance proceeds of $11,986, of which $8,486 had been received. As the fire damaged a building leased by the Company, pursuant to the terms of the lease agreement, the Company was responsible to restore the property to full replacement value. With the Company being fully insured, the restoration of the property was covered by insurance and the insurance carrier has separately funded payments of insurance proceeds as of September 30, 2020 and 2019, respectively, directly to the landlord for the restoration of the building as prescribed under the lease arrangement in the amount of $713 and $2,878, respectively. The table below reflects the receipt of proceeds and how they were disbursed as of September 30, 2020 and 2019, respectively. Any additional recoveries in excess of recognized losses are treated as gain contingencies and will be recognized when the gain is realized or realizable. The Company maintains business interruption insurance coverage and continues to work with the insurance company to reach an agreement on the recoverable amounts of business interruption expenses. As noted within the tables below, payments totaling $1,219 and $1,168 were made towards this coverage as of September 30, 2020 and 2019 and are reflected within the cost of goods sold line within the consolidated financial statements.


Balance sheet (Other receivables):

September 30, 2018		$	—
	Cash received	(8,486)
	Capital expenditures (equipment)	8,355

	Other expenses	2,463
	Business interruption	1,168
September 30, 2019		$	3,500


Balance sheet (Other receivables):

September 30, 2019		$	3,500
	Cash received	(10,927)
	Capital expenditures (equipment)	5,874
	Other expenses	1,881
	Business interruption	1,219
September 30, 2020		$	1,547

The following table reflects how the proceeds received impacted the consolidated statements of operations as of September 30,


	Year Ended September 30, 2020
	Balance without insurance proceeds		Insurance recoveries		Balance with insurance proceeds

Cost of goods sold	$	96,711	$	(3,100)	$	93,611
Gain on insurance recoveries	$	—	(5,874)		$	(5,874)
Income before income tax benefit	$	6	(8,974)		$	8,980


	Year Ended September 30, 2019
	Balance without insurance proceeds		Insurance recoveries		Balance with insurance proceeds

Cost of goods sold	$	105,448	$	(3,631)	$	101,817
Loss (gain) on insurance recoveries	$	1,102	(8,355)		$	(7,253)
Loss before income tax benefit	$	(20,193)	(11,986)		$	(8,207)

Included in the September 30, 2019 loss (gain) on insurance proceeds in the consolidated statements of operations is approximately $1,107 in impairment charges for the equipment damaged by the fire offset by insurance proceeds received. In fiscal 2019, the Company performed a separate evaluation of the long-lived assets that were not damaged in the fire. In accordance with Topic 360, the fire resulted in a triggering event as of December 31, 2018, requiring an interim assessment to determine if the carrying amount of long-lived assets are recoverable. As noted within Topic 360, an impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The results of management's analysis indicated that the remaining long-lived assets as of December 31, 2018 were recoverable and continued to be as of September 30, 2019.