Commitments and Contingencies

3 Months Ended

Dec. 31, 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 disputes 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 has not deemed it probable and 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 and there were no objections to the settlement. On February 4, 2021, the court issued a tentative ruling to grant final approval. The final approval hearing is scheduled for April 16, 2021. The Company previously recorded an estimated loss of $315, which was determined to be an adequate reserve to cover the settlement.

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 2020 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 the first quarter of fiscal 2021, the insurance claim related to the fire on December 26, 2018 at the Orange location was finalized with the Company's insurance carrier. The Company continues to work diligently to restore the final two of the six presses damaged in the fire, which both continue to be on track to be completed by the end of the second quarter of fiscal 2021; however, no assurances can be made that the restoration will be completed within such timeframe. Restoration of the building structure is nearly complete.

Having finalized the claim with its insurance carrier, proceeds in the amount of $3,148 was received in December 2020. As noted in the table below, $3,099 was recognized within the consolidated condensed statements of operations and the balance was separately designated to the landlord for the continued restoration of the damaged building as prescribed under the lease arrangement. The Company has business interruption insurance coverage, of which $546 of the amount received was reflected within the cost of goods sold line within the consolidated condensed statement of operations.


Balance sheet (Other receivables):
September 30, 2020		$	1,547
	Cash proceeds	(3,998)
	Capital expenditures (equipment)	2,495

	Other expenses	58
	Business interruption	546
December 31, 2020		$	648

The tables below reflect how the proceeds received impacted the consolidated condensed statements of operations for the three months ended December 31, 2020 and 2019, respectively.


	Three Months Ended December 31, 2020
	Balance without insurance proceeds		Insurance recoveries	Balance with insurance proceeds

Cost of goods sold	$	21,759	(604)	$	21,155
Gain on insurance proceeds received	$	—	(2,495)	$	(2,495)
Income (loss) before income tax (benefit) expense	$	(1,011)	(3,099)	$	2,088


	Three Months Ended December 31, 2019
	Balance without insurance proceeds		Insurance recoveries	Balance with insurance proceeds

Cost of goods sold	$	24,053	(1,170)	$	22,883

Income (loss) before income tax (benefit) expense	$	(2,607)	(1,170)	$	(1,437)

The following table demonstrates the total settlement amount since December 26, 2018:


	Total Claim
Property & damage **	$	20,364
Extra expense & mitigation expense	4,404
Business interruption	2,932
	$	27,700

**$3,640 of total was directed to Landlord for the restoration of the building as prescribed by the lease arrangement.